THURSDAY JULY 21: EPZA reluctant to pay advance tax: talks with FBR inconclusive

KARACHI: Talks between the Federal Board of Revenue (FBR) and representatives of Export Processing Zone Authority (EPZA) over the issue of advance tax on power consumption remained inconclusive as the Authority is reluctant to pay the said liability. According to sources, the EPZA was of the view that it does not come under tax ambit because of the portfolio of non-profitable organisation.
However, the Authority is not tax exempted and falls under the definition of autonomous bodies after the amendments made in the Finance Act 2008. Sources said that although around 171 exporting units of EPZA are tax exempted, the same were not enrolled in the grid of Karachi Electric Supply Company (KESC). Therefore, the EPZA, besides issuing bills on behalf of KESC, is liable to provide electricity to these units after receiving the same in bulk from the utility at concessionary rate.
They said that the KESC is currently charging advance tax under section 235 of the ordinance at specified rate from EPZA on its bulk power consumption as the Authority falls under the definition of autonomous bodies after the amendments in section 49 through Finance Act 2008.
Sources said that the issue came in light when these exporting units filed a complaint in FTO office that the EPZA was charging the said tax liability to them. Moreover, they said the FTO office had taken serious notice on the complaint and had directed the tax authority to resolve the grievances of these units, immediately.
Reacting to the directives, the Karachi Large Taxpayers Unit (LTU) convened a meeting with the representatives of KESC and EPZA to resolve the issue, amicably. Sources said the tax department at a meeting has proposed to the EPZA to file income tax return and get back all payments made under this head from the board. However, the authority has refused to do so, which led to make the talks inconclusive.
Meanwhile, the Karachi LTU has also asked to both stakeholders ie KESC and EPZA to find the best way out in this connection before next meeting, which is scheduled to be held on coming Friday.
Sources said the amendments in section 49 through Finance Act, 2008 were made in a haphazard manner, which led to create this problem. On the one hand, the autonomous bodies were brought in tax net while the company, preparing electricity consumption bill, was also restricted to charge advance tax under section 235 of Income Tax Ordinance 2001 on electricity consumption. However, on the other hand, the exporting units are granted tax exemptions and made liable to pay 1 percent tax under final tax regime at the time of realisation of foreign exchange proceeds on account of the export of goods, they observed.