WITH reference to the letter published on Aug 29 alleging incorrect calculation of sales tax in the bills, the KESC would like to clarify that the issue raised regarding GST was “The KESC, on behalf of the government of Pakistan, can collect general sales tax on electricity charges only, now designated as variable charges in the bill, and not on any other item such as meter rent and electricity duty”

This notion reflects a lack of knowledge of sales tax law as applicable to supply of electricity in Pakistan.

The sales tax on electric power is charged under rule 13 (2)(b), Chapter III of Sales Tax Special Procedure Rules 2007.

The relevant extract of the law is reproduced as under:

“13. Levy and collection of sales tax.—

(b) in case of generation, transmission, distribution and supply of electric power by a public sector project like Wapda, a private sector project including an IPP, a captive power unit or any other person, the responsibility to collect sales tax shall be of the person making the supply, and the value shall be the price of electric power including all charges, surcharges excluding the amount of late payment surcharge, rents, commissions and all duties and taxes whether local, provincial or federal, but excluding the amount of sales tax, as provided in clause (46) of section 2 of the Act.”

In view of the above, sales tax on electricity is required to be collected on the value of electric power, all charges, surcharges, rents, commissions, and all duties and taxes of local, provincial and federal government, excluding the amount of late payment surcharge and sales tax.

It is further clarified that the sales tax is collected on behalf of the FBR, so the KESC has no benefit whatsoever in charging higher amount of sales tax to the consumers.

Hope this clarifies any misunderstanding regarding the computation of GST on KESC bills.

AAMIR ABBASI

Spokesperson for

KESC

Karachi