Wapda, KESC to pay sales tax on 'late payment surcharge'

The Central Board of Revenue (CBR) has announced that Wapda and KESC will pay sales tax on 'late payment surcharge' collected from consumers on late payment of power bills from October 1, 2004. The CBR has notified the decision through SRO 807(I)/2004 of September 24, 2004.
As per SRO 807(I)/2004, Wapda and KESC, who pay sales tax on cash collection basis, shall, with effect from October 1, 2004, pay sales tax on 'late payment surcharge' included in the electricity bills.
In another decision notified through SRO 808(I)/2004, sales tax shall not be charged on late payment surcharge collected by SSGC, SNGPL and PTCL.
Under Sales Tax Special Procedures Rules, 2004, Wapda and KESC are allowed to pay sales tax on 'cash-collection basis', while SNGPL, SSGC and PTCL are discharging their sales tax liability on 'billing basis'.
All these companies, however, levy 'late payment surcharge' in case a consumer pays the principal amount of the bill after due date, but except SSGC and SNGPL, no other company is paying sales tax on this late payment surcharge.
Payment of sales tax on cash collection basis by Wapda and KESC postpones the deposit of the tax amount if the consumer delays the payment of a bill. However, in case of SSGC, SNGPL and PTCL who deposit sales tax on billing basis, the payment of sales tax is not delayed even if a consumer delays the payment of bill amount. Thus the payment of surcharge by these companies was technically a 'financial charge' for withholding the payment of billed amount beyond a certain period.
Accordingly, the CBR has issued two notifications viz. SRO 807(I)/2004 and 808(I)/2004 whereby necessary changes have been made in the Sales Tax Special Procedures Rules, 2004 to expressly include late payment surcharge in the definition of value of supply in case of Wapda and KESC and to exclude the same in case of SSGC, SNGPL & PTCL.