Islamabad: The Federal Tax Ombudsman (FTO) has directed all electricity distribution companies not to be affected by net metering for collecting sales tax.
The FTO has issued a decision to collect 18 percent sales tax from electricity consumers on solar net metering.
The FTO has said in the decision that all electricity distribution companies should collect 18 percent sales tax on electricity supply and K-Electric Supply Company should also collect 18 percent sales tax from consumers. Electricity distribution companies should not be affected by net metering for collecting sales tax.
All government discos are not collecting tax from consumers as per the laws, due to which the treasury is losing Rs 9.38 billion annually. Government discos are not collecting full sales tax from electricity consumers.
The FTO has recommended an investigation to the FBR for causing loss to the national exchequer, on which the FBR will investigate and submit a report within 60 days. K-Electric is correctly collecting 18% sales tax from consumers.
There is no concept of net metering under the sales tax provisions, sales tax must be collected not on the net of value but on the supply and sales tax must be deducted on the gross amount without any effect of net metering.
All the discos will have to collect sales tax without any effect of net metering and will have to collect sales tax on the gross supply of electricity supplied to the consumers.
K-Electric is collecting sales tax as per the legally valid provisions and is correctly collecting tax on electricity bills.
It should be noted that a K-Electric consumer had complained to the FTO about the collection of tax on the gross supply of electricity.
