Export-oriented sectors: Textile industry seeks advisor's help against ST on power bills

The textile industry has approached Prime Minister's Advisor on Commerce and Investment, Abdul Razak Dawood, seeking his help against imposition of sales tax on electricity bills from July 2019 on export-oriented sectors.

Section 2 sub-clause 46 of the Sales Tax Act 1990 states sales tax is leviable on "in case of supply of electric power and gas by a distribution company, the total amount billed including price of electricity and natural gas, as the case may be, charges, rents, commissions and all duties and taxes local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax".

The textile industry is of the view that Power Division in contravention of the law has issued bills through its Discos to the export sector, charging sales tax and other taxes, on a notional B3 tariff for not only the month of March 2020 but retrospectively from July 2019 to date at the higher notional value.

"This is clearly in conflict with the Act as the notional value-B3 tariff has not been billed or charged which is clearly the wording of the Act. They have consequently, in contravention of law, raised additional bills pertaining to the previous nine months to the export sector for an additional Rs20 million per consumer on an average-size textile factory," said Shahid Sattar, Executive Director APTMA, in a letter to the Commerce Advisor.

The textile industry further argued that on the one hand the government due to COVID-19 crisis is frantically trying to maintain the liquidity of the units by giving relaxations, fresh discounted loans and all the other support possible to these industries to enable survival of the exceptional cash flow crisis, maintain employment while on the other hand Power Division is negating these commendable government efforts for sustaining businesses and jobs by issuing unjustified and illegal bills for amounts that are (i) retrospective from July 2019;(ii) not in accordance with the sales tax law and therefore illegal;(iii) negating government policy and soaking up any remaining liquidity of the market;(iv) in contravention of the agreement reached with the negotiation committee on the all-inclusive 7.5 cents/kwh tariff for export sectors plus applicable taxes till 30th June 2020;(v) this action is in negation of the ECC ruling on RLNG/gas pricing which clearly states that the GST was to be charged on 6.5$/MMbtu which is the tariff billed and ;(vi) destroying business confidence of the industrial community in the government's application of laws, policies and agreements.

The APTMA maintained that this is not the first time that the Power Division has negated government policy. In the past application of the 7.5 cents/kwh has been marred by repeated illegal attempts of the Power Division for retrospective application of a higher tariff which culminated in the meeting chaired by Razak Dawood wherein the matter was apparently resolved.