ISLAMABAD: The Supreme Court has accepted the Federal Board of Revenue’s (FBR) appeal and set aside the Oct 17, 2023 Balochistan High Court (BHC) judgement that had granted tax relief to flour mills.

A three-judge SC bench, headed by Chief Justice of Pakistan Yahya Afridi, conclusively settled the long-standing dispute over the tax obligations of flour mills operating across the country.

The controversy began when the Quetta Electric Supply Company, acting as a withholding agent, started collecting ‘Extra Tax and Further Tax’ from flour mills through electricity bills under SROs issued on June 12, 2013, and Sept 17, 2021.

Several flour mills challenged the levy before the BHC.

On Oct 17, 2023, the high court held that flour mills were exempt, relying on Section 13, read with Item No. 19 of the Sixth Schedule to the Sales Tax Act, 1990.

That verdict, however, conflicted with the Lahore High Court’s 2022 judgement in the Waqar Flour Mills case, where this levy on flour mills was upheld under Section 3(5) of the Sales Tax Act, with the SROs declared valid and enforceable.

To resolve the inconsistency, the FBR filed appeals before the Supreme Court.

Representing the FBR, Advocate Hafiz Ehsaan Ahmad Khokhar argued that exemption under Section 13 does not absolve flour mills from their statutory duty to obtain sales tax registration.

Mr Khokhar emphasised that under Sections 2(25), 2(41), and 3(1A) of the Sales Tax Act, every business consuming electricity must obtain a sales tax registration number, contending that the levy under the SROs are lawfully chargeable to non-registered persons and those not on the Active Taxpayers List, as envisaged under Section 2(1).

The mills were represented by Advocate Qamar-uz-Zaman Cheema.

After reviewing the statutory framework, relevant SROs, and the conflicting high court rulings, the Supreme Court categorically rejected the BHC interpretation and upheld the FBR’s stance.

Published in Dawn, September 14th, 2025