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ISLAMABAD: Peshawar Electric Supply Company (PESCO) is unhappy with the Tax Laws (Amendment) Act, 2024 for State-Owned Enterprises (SOEs), saying the proposed mechanism for the resolution of disputes through Alternate Dispute Resolution Committees (ADRCs), will have financial implications on Discos to be recovered from consumers through tariff adjustment.

These apprehensions have been shared by the Chief Executive Officer (CEO) PESCO with the Power Division, seeking its support to resolve it with the help of the Finance Ministry.

According to CEO PESCO, Tax Laws (Amendment) Act, 2024 restrains SOEs from appealing against the decisions of tax assessing authorities in the Appellant Tribunal, thus reducing the Commissioner (Appeal)’s jurisdiction.

In a letter to Power Division, he said that previously, SOEs were treated as normal taxpayers, with appeals progressing from the Commissioner (Appeals) to higher Courts. However, now the Tax Laws (Amendment) Act, 2024 requires, SOEs to apply to the Federal Board of Revenue (FBR) for a Dispute Resolution Committee. The relevant proviso of section 134A of the Income Tax Ordinance, 2001, are as follows “provided that where the aggrieved person is a State-Owned Enterprise the limit of fifty million rupees or above mentioned in clause (a) of sub-section (1) shall not apply and it shall be mandatory for such aggrieved SOE to apply to the Board for the appointment of a committee for the resolution of any dispute under this section.”

“The Tax Laws (Amendment) Act, 2024, brings forth substantial repercussions for all the Discos including PESCO, cases involving huge financial implications across multiple forums are active. The necessity to approach the Alternate Dispute Resolution Committee first means that all these cases must be withdrawn and resubmitted to the ADRC,” he added.

The new Act’s denial of PESCO’s right to appeal and seek reference could significantly escalate its operational costs, increasing its financial distress. The binding nature of ADRC’s decision, as specified by the law, adds another layer of complexity. Once the ADRC decides the dispute within 60 days, its decision is considered to be final. This eliminates the possibility of seeking redressal through higher judicial bodies, potentially compromising PESCO’s ability to challenge decision that may adversely affect its interests and also cash flow position, he continued.

The CEO PESCO is of the view that any adverse decisions by ADRC will create a potential risk to substantial tax exposure and if this tax exposure is passed on to PESCO, it will inevitably impact consumer tariffs, as any imposed taxes will ultimately be borne by consumers through tariff adjustments and can create the exposure of billions of taxes that will affect financial health as well as tariff structure. Given the political sensitivity surrounding tariff hikes, this presents a complex and urgent challenge that requires immediate attention.

Copyright Business Recorder, 2024

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