Power consumption by re-rolling units: sales tax collectors start verification campaign

The Collectors of sales tax have started an exercise to verify unit-wise consumption of electricity by steel melters and re-rolling mills to detect any evasion of sales tax or power theft reducing incidence of sales tax payment from July 1, 2007. In this connection, the Federal Board of Revenue (FBR) has issued instructions to the collectors of sales tax.
Sources told Business Recorder on Saturday that the board has asked the collectors to analyse sales tax payments by the steel sector during the first three months of 2007-08. The unit-wise electricity consumption by each unit before implementing new system would be compared with the payment made after enforcement of the Sales Tax Special Procedure from July 1, 2007.
The new system was implemented for collection of sales tax on the basis of electricity units consumed by steel melters and re-rollers from fiscal 2007-08.
Sources said that the exercise would be instrumental in detecting units showing abnormal decrease in unit-wise consumption of electricity during July-September (2007-08).
If there is shortfall or huge variation in the use of electricity by the steel melters and re-rolling during July-September 2007-08 against the corresponding period of last fiscal year, there would be need of thorough scrutiny. The matter would be probed in case of suspected units only, sources said.
Under the new procedure, steel melter, steel re-roller and composite units of steel melting and re-rolling will have to pay sales tax at the rate of Rs 4.75 per unit of electricity consumed for the production of steel billets, ingots and mild steel (MS) products.
Sources said that the electricity supplying companies would operate as withholding agents for collection of sales tax from steel sector for which sales tax has to be specified on the bills issued to steel-melters and re-rolling mills. It is the responsibility of power supplying companies to incorporate incidence of sales tax in the bills eliminating the role of sales tax officials under new mode of payment.
The board had issued separate procedure for calculating sales tax to be paid by the steel melters and re-rolling mills, who have their own power plants or use generators for producing electricity.
Sales tax calculation formula has already been issued for those steel melters and re-rolling mills, where electricity supplying companies like Lahore Electric Supply Company (Lesco), Gujranwala Electric Power Company (Gepco) etc supply power to these units. However, a separate procedure was needed for those companies which did not purchase electricity from power supplying companies. In this case, the units have their own power plants, or use generators for producing electricity.