Pakistani Govt has decided to roll back the flat tax regime introduced in the Finance Bill 2022 for retailers to pay sales tax through electricity bills.
The government took the decision after strong protest from stakeholders, which include service providers who do not come under the jurisdiction of the federal tax authority.
To assess the fixed tax regime, a meeting of the Ministry of Finance was held on August 4, 2022 to complete the collection of sales tax through electricity invoices.
The meeting was chaired by the Minister of Finance Dr. Miftah Ismail. In the meeting, it was decided that the flat tax regime introduced by the Finance Bill 2022 will be withdrawn from the outset and retailers will continue to pay tax as before (pre-Budget) mechanism and rates. The meeting decided that for the next three months, i.e. From July to September 2022, previous tax rates will continue to apply to retailers.
It was decided that the government will assess the situation and announce a new tax rate from October 1, 2022.
To amend the Fixed Tax Ordinance, the FBR will implement the necessary legislation as soon as possible.
A fixed rate of tax was introduced and FBR started enforcing it through electricity bills with effect from 1 July 2022. The power company on behalf of FBR applied a fixed tax on all commercial connections irrespective of the nature of the companies, including service providers.
The illogical use of the flat tax regime caused great outrage from some quarters, forcing the government to review its decision.
The Federal Tax Ombudsman (FTO) recently launched an investigation into a complaint received regarding the collection of sales tax through electricity bills.
FTO issued a notice on 29 July 2022 to the Minister, Department of Revenue, Chief Commissioner and Commissioner of Large Tax Payers Office (LTO) Karachi in a complaint filed by Ms. Fauzia Salman against illegal and unlawful collection of taxes through electricity bills by K -Limitado sa Elektrisididad.
The FTO ordered an investigation into the complaint. The tax administrator is ordered to submit a response to the allegations contained in the complaint.
The complainant had earlier sent a letter to K-Electric, a power company in Karachi, and forwarded it to the chairman of the Federal Bureau of Revenue (FBR), the federal ombudsman and chambers of commerce, Fauzia pointed out that his company Month. electricity bill, which includes: an additional tax of 3 percent; additional tax/retail tax of 5 percent; and a newly introduced sales tax of Rs 6,000 for retailers who are inactive tax payers.