The Federal Board of Revenue (FBR) has asked the power distribution companies and gas distribution companies to check consumption of electricity and natural gas by the manufacturers in sales tax zero-rated sectors, to ascertain actual consumption of the utilities during manufacturing process.
Sources told Business Recorder on Saturday that the FBR has recently zero-rated different industrial units for sales tax purposes and relevant sales tax general orders (STGOs) have been issued in this regard. The list of sales tax zero-rated units has been expanded, for which necessary general orders were amended.
The board wanted to monitor the utilities consumption by the zero-rated units to check their production capacity and electricity and gas consumption on regular basis. According to the instructions issued to the gas distribution companies, the FBR amended STGOs under which supply of natural gas by gas companies to the manufacturing units have been zero-rated for sales tax purpose.
The names, sales tax registration numbers and gas connection particulars of the registered units have been mentioned in the STGOs. After issuance of the STGOs, sales tax will be charged at the rate of zero percent on the supply of natural gas to the units mentioned therein.
The FBR has requested the gas companies that necessary arrangements to apply zero percent rate of sales tax in the gas bills issued to the industrial units should be made accordingly, according to the directive to gas companies. It has been further requested that data relating to quantum of gas consumed by these units as per monthly bills issued to them be communicated to the relevant Collector of Regional Tax Office (RTO) in a summarised form, on monthly basis.
As per directives issued to power distribution companies, the board has further amended STGOs under which supply of electricity by power distribution companies to the manufacturing units of sales tax registered persons have been zero-rated for sales tax purpose.
The names, sales tax registration numbers and electricity connection particulars of the aforesaid persons have been mentioned in the STGOs. After issuance of the STGO sales tax shall be charged at the rated of zero percent on the supply of electricity to the units mentioned therein. The board further asked the power distribution companies that necessary arrangements to apply zero percent rate of sales tax in the electricity bills issued to the said units he made accordingly.
When contacted, a tax expert said that the units have to fulfil certain conditions for availing zero-rating facility on the electricity consumption. First, the electricity connection be in the name of the registered person and the bill issued by electricity provider contains the name and the sales tax registration number of such person.
Second, in case the connection is not in the name of such person; the registration number of such person is mentioned in the electricity bill along with the address of such person as given by him in his application for sales tax registration. Third, electricity is consumed only for the manufacture of specified goods.