Exempted power supplies to Pata: FBR fails to add proper column to ST returns

LAHORE: The Federal Board of Revenue (FBR) has failed to add a column to the sales tax returns to entertain exempted electricity supplies by the Peshawar Electric Supply Company (Pesco) to the Provincially Administered Tribal Area (Pata) despite clear instructions from courts.

Hussain Sherazi, a tax consultant, said the issue relates to inadmissible input tax claimed against exempt supplies is resulting into short payment of sales tax.

According to him, the issue was discussed again thoroughly in the Appellate Tribunal Inland Revenue, Lahore Bench. He said there is no column in the sales tax return which caters to the peculiar situation of the Pesco’s inability to collect sales tax relating to energy supplies made to the Pata due to orders passed by the courts. Therefore, the Pesco had showed these supplies under the exempt column.

He said the sales tax was included in the electricity bills issued to the consumer in June 2004 but the civil judge Swat had stayed its recovery on the ground that Sales Tax Act, 1990 is not applicable to the PATA. But the Sales Tax Return form does not cater to any eventuality where the courts of competent jurisdiction have stayed the recovery of sales tax, he added.

He said a clarification has been sought repeatedly at the adjudication/assessment and appeal stages to guide the Pesco regarding the column in the return where under the relevant figures relating to output tax payable by the consumers in Pata but stayed by a court of law can be shown. However, no such guidance has ever been provided and per force these supplies of electricity in Pata were shown in exempt column which are otherwise taxable supplies in view of FBR’s letter C. No. 3(30) STP/99 dated 22-10-2003. It is settled law that a party should not be made to suffer on the account of act or omission on the part of court, he said.

Sherazi said even the department is not clear as to the placement of such supplies in the sales tax return. In such unavoidable circumstances, simple mention of these supplies in Pata under the exempt column does not render them exempt as charged in the show cause notice, he said.

He said the Board should take stock of the situation and resolve the issue once and for all in order to streamline sales tax collection in Pesco region.

Copyright Business Recorder, 2022