Wapda and KESC to pay sales tax on amount billed to consumers

The government has made it mandatory, from July 1, 2006, for both the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (Wapda) to pay sales tax on ''''total amount billed to consumers''''.
The Central Board of Revenue (CBR) has amended the relevant rules to give equal treatment to both power entities for payment of sales tax.
Official sources told Business Recorder on Wednesday that the CBR had asked KESC to pay sales tax on accrual or billing basis, whereas the sales tax collection from Wapda is on cash collection basis. At present, the latter pays sales tax on total amount collected from the consumers.
Now, it has been decided that GST collection from Wapda would also be on accrual or billing basis from July 1. The applicability of this system for KESC shall also be made effective from the same date, officials said.
Explaining the reason for decision, they said that as KESC would no longer remain a government entity, following its privatisation, it should pay sales tax on total amount billed to the consumers.
On the other hand, KESC has demanded special treatment and wanted to pay sales tax on the actual amount of bills collected from its consumers. The Corporation wanted privileges like Wapda to pay sales tax on collected amount of bills.
To end this discrepancy, both the KESC and the Wapda would pay sales tax on the total amount billed to their consumers from next financial year (2006-07).
Officials said that it is a global practice that power distribution companies pay sales tax on the amount of bills issued to their consumers. There is no concept of special dispensation to the power companies anywhere in the world.