Three-month electricity bills mandatory for sales tax adjustment

KARACHI: The Federal Board of Revenue (FBR) has said that the adjustment of reduced sales tax rate will only be applied to steel melters and re-rollers that present last three months electricity bills as evidence.

The FBR on Wednesday issued procedure for payment and adjustment of tax by steel melters and re-rollers under a Statutory Regulatory Order (SRO) 1486(I) 2012 of December 24, 2012 about the reduced rate of sales tax at 5 percent.

The collection of sales tax from steel industry is based on electricity units consumed and in the last SRO it was reduced to Rs4 from Rs7.

Under the procedure, the FBR said that only those steel melters and re-rollers would be entitled for adjustment that fall under Sales Tax Special Procedure, 2007 for payment of sales tax.

“The registered person operating under the Special Procedures, on the basis of tax so paid, shall obtain an adjustment certificate from the commissioner of Inland Services after production of goods declaration (GDs),” the procedure stated. The GD must be in the name of claimant of sales tax adjustment, it added.

The adjustment of sales tax is subject to provision of last three months electricity bills evidencing that the steel melting unit is in operational condition and that the unit is paying sales tax under the special procedure.

The FBR said that commissioner Inland Revenue would issue the adjustment certificate within seven days of the production of the documents and also endorse a copy to the concerned power distribution company.

On the issuance of certificate, the power distribution companies (disco) and KESC will reduce the amount of sales tax on electricity bill for the tax payable at Rs4 per unit. “However, in case the sales tax paid amount on the adjustment certificate is greater than the amount of actual sales tax under Special Procedure Rules, the same shall be adjusted in the electricity bill for the subsequent months,” the FBR said.

The FBR also clarified that the adjustment procedure would not be applicable to those steel melting units and re-rolling mills operating on bagasse and other waste products within sugar mills and other units which have not opted for the special procedure.

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