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ISLAMABAD: World Bank (WB) has reportedly linked release of $400 million of RISE-II program to resolution of dispute on GST collection between Federal Board of Revenue (FBR) and Distribution Companies (Discos) well informed sources told Business Recorder.

According to Finance Division (External Finance Wing) prior action 4b of RISE-II “the Finance Division Refunds Central Power Purchasing Agency Guaranteed (CPPA-G)/ Discos Rs 240 billion for overcharged General Sales Tax” remains pending due to non-consensus on amount of refunds made on subsidies. FBR has shared the amount of refunds which is Rs 6 billion against claims of Rs 10 billion.

The sources said that the outcome of negations between FBR and Power Division has not been shared with the World Bank due to which an embarrassing situation for the government arose as World Bank refused to release $ 400 million until the document is not shared with it on this issue.

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FBR maintains that during the course of tax proceedings against various Discos, tax demand of Rs 232.136 billion was created on account of subsidy being provided by the Federal Government as the definition of “value of supply” vide clause (46) of the Sales Tax Act, 1990 mandated levy of sales tax on such subsidy. In consequences thereof, an amount of Rs 6 billion (approximately) was also recovered. However, through Finance Act, 2022, it was clarified that the value of supply does not include the amount of subsidy provided by the federal government, etc., and owing to its retrospective application the said recovered amount became refundable.

In the last meeting chaired by SAPM on Finance and Revenue, Tariq Bajwa, the issue was resolved with the Discos and it was decided that the refunds determined on the basis of subsidy amounting to Rs 3 billion (approximately) instead of Rs 10 billion would be issued in a phased manner by June 30, 2023, starting payment of refund from Jan 2023. FBR agreed to the decision and it was assured that due amount of refunds shall be refunded to the respective Discos in a phased manner, after adjusting the amount under Rule 24, if any.

FBR also proposed necessary improvements in wording in Sales Tax Special Procedures for collection and payment of Sales Tax by Discos as proposed. The technical team comprising officers of FBR and PRAL is being constituted and shall be communicated to Power Division in due course for visit to WAPDA House, Lahore for digital sharing of ST&FE Return data of DISCOs. Power Division has been requested to nominate its technical team with contact details and also communicate the date and time etc. Similar arrangement for digital data sharing by K-Electric may also be coordinated and arranged for a harmonized and uniform operationalization of the proposed digitization.

Copyright Business Recorder, 2023

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