- Non-compliance to tax obligations for net metering costing exchequer dear
ISLAMABAD: All Ex-WAPDA distribution companies (DISCOs), except K-Electric are allegedly charging net-metering consumers with General Sales Tax (GST) on the basis of net electricity units in violation of directives from the Inland Revenue Policy Wing of the Federal Board of Revenue (FBR).
According to sources in the power sector, all XWDISCOs have so far allegedly continued to charge their net-metering consumers with GST on the basis of net units. They said that total net-metering consumer base is 37,769 as per NEPRA’s State of the Industry (SOI) Report 2022. They said all government-owned distribution companies (XWDISCOs), except Karachi’s K-Electric, are erroneously applying GST on units which are net of electricity provided by the utility minus the excess units supplied to the national grid by the consumer. However, the procedure followed by these XWDISCOs contradicts FBR’s tax treatment instructions on net metering bills and it is causing loss to the national exchequer, said sources.
The FBR’s tax treatment instructions on net metering bills clearly say, “The Sales Tax required to be charged on the value of supply and not the net-off value. Therefore, it is clarified that all DISCOs, including KE, are required to charge Sales Tax on the gross amount of value of electricity supplied to the consumer without having any effect of net metering,” they added.
As per sources, it is estimated that the disregard of the said FBR’s instruction by XWDISCOs has obstructed the collection of approximately 25 million rupees in terms of taxes in Financial Year (FY) 21-22 alone and is also causing loss of revenue on an incremental basis as the net-metering consumer share continues to increase exponentially.
According to National Electric Power Regulatory Authority’s State of Industry Report 2022, XWDISCOs including LESCO, GEPCO, FESCO, IESCO, MEPCO, PESCO, HESCO, SEPCO and QESCO have exported the total 150,669,148 units while they imported total 869,528,866 units and their total consumers base is 37,769. Similarly, net metering is in the interest of the power sector and needs to be encouraged. However, reportedly, DISCO’s behavior towards net-metering connections is not encouraging. Further, it is reported that DISCOs in most cases are not paying the payable amount to consumers with net metering licenses for those electricity units supplied more than their use, said NEPRA’s State of Industry Report 2022.
It is pertinent to mention that the government is constantly looking for ways to shrink power subsidies and expand the tax net. However, this absurd maltreatment of tax instructions by XWDISCOs has so far remained counterproductive to the government’s efforts. Moreover, these government-owned distribution companies are already a huge burden on the national exchequer and the power sector, as these loss-making entities contribute billions to the country’s rising circular debt.
