ISLAMABAD: The claim of the government to reduce electricity tariff received a rude shock as the global lender IMF (International Monetary Fund) rejected Islamabad’s proposal to cut sales tax.
The Ministry of Energy had suggested the government a cut in sales tax. And the government sent a request to the IMF which turned it down.
The IMF said that exemption from new taxes cannot be given under its loan programme. It will not be possible to achieve tax collection targets if sales tax is reduced, added the IMF.
It may be noted that a consumer is charged GST twice in electricity bills – once 18 percent tax is levied on the total amount of the bill, while the second time sales tax is levied on fuel cost adjustment.
OTHER LEVIES ON POWER BILLS
The government collects Rs954 billion annually from taxes levied on electricity bills. Of this amount, the federal government receives Rs391 billion, while the provinces get Rs563 billion.
According to a document released by the government in August 2024, a consumer is slapped with income tax, advance tax, additional tax, extra sales tax, retailers’ sales tax, electricity duty, and PTV fee.
The breakdown of the taxes is as follows:
Electricity Duty: It is a provincial levy ranging from 1% to 1.5% of variable charges, applicable to all consumers.
PTV License Fee: An additional charge of Rs35 for domestic consumers and Rs60 for commercial consumers is added to the bills.
Financing Cost Surcharge: Imposed at a rate of Rs0.43 per kWh, affecting all consumer categories except lifeline domestic consumers.
Fuel Price Adjustment (FPA): A variable component reflecting the discrepancy between actual and reference fuel charges.
Extra Tax: Industrial and commercial consumers, not registered in the active taxpayer list of the Federal Board of Revenue (FBR), are subject to a tax rate of 5% to 17%, depending on different bill amount slabs.
Further Tax: This additional tax of 3% is levied on all consumers without a Sales Tax Return Number (STRN), excluding domestic, agricultural, bulk consumers, and street light connections.
Income Tax: Charged at varying rates based on applicable tariffs and the amount of the electricity bill.
Sales Tax: Commercial consumers are taxed at a rate of 5% on bills up to Rs20,000 and 7.5% on bills exceeding Rs20,000.
