FBR says deduction being made in accordance with law
ISLAMABAD: The top mandarins of the Ministry of Water and Power (MoWP) get agitated over at source GST deduction of Rs69 billion by the FBR, arguing that it is sheer injustice to the system as tax collection authorities need to gather the said tax on the bills paid by the consumers on electricity units sold to them. The amount of Rs69 billion has unjustifiably been collected by tax authorities in last two years.
However, the tax collecting authorities are adamant on deducting at source GST at the stage of electricity generation to show their performance, but this is adding more fuel to the financial agony of the power sector. The Water and Power Ministry officials further pitched their arguments, saying if the FBR didn’t bar itself from at source deduction of GST, then it will cause more impetus in increasing the circular debt--the monster that is currently being maintained below Rs324 billion.
“We say recovery of the billed electricity units stand at 93.4 percent and at the recovered cost of generated electricity; the ministry is ready to pay the GST that is collected from end consumers,” senior officials said, adding that collecting GST on the generation of electricity units is not justified as the said amount distribution companies cannot recover from the consumers, as sizeable quantity of electricity units go wasted because of transmission and distribution losses and electricity theft.
Electric power distribution companies (Discos) are the agents to collect the GST on the electricity bills and they pay the GST, but unfortunately the authorities at FBR are not in the mood to convince themselves on the persuasive arguments of the ministry. The Discos are unable to pay the GST on the electricity units which are gone down the drain in the wake of losses and theft.
The ministry agitated this particular issue by sending a summary containing a reference against FBR to ECC in December 2015, seeking the acceptable GST deduction mechanism, but the issue could not be resolved.
However, ECC constituted a committee comprising FBR chairman and two representatives each from the Finance Ministry and Water and Power Ministry with an aim to revise the mechanism about collecting the GST.
Interestingly the committee could not hold any meeting to this effect because of the budget meetings and there was no time available to thrash out the said issue and now the budget 2016-17 is over and the committee may meet any time.
However, FBR spokesman, when contacted, said that when it comes to power sector, law clearly mentions that GST should be collected when central power purchase agency (CPPA) sells electricity units to electric power distribution companies. CPPA is the entity that purchases the electricity from Gencos and sells it to electric power distribution companies (Disos).
And the Discos’ viewpoint is against the law which says that the GST should be deducted what they collect from the end consumers through bills. The FBR spokesman says Ministry of Water and Power and Discos under their stance factually admit their inefficiency because of which the electricity units go wasted in the wake of line losses and theft as the recovery of billed electricity is not up to the mark as it stands at 93 percent. And on top of that Discos are unable to bill the electricity units what they receive from CPPA. “So MoWP and Discos want to pay the GST what they recover from the end consumers and do not pay the GST on units which go wasted because of their inefficiency.
The law, the spokesman says, cannot be changed. However, if the case rests with the committee constituted by the ECC, then when it meets, the result will come out. However, FBR’s stance is very clear that GST will continue to be collected at source till the committee carves out any mechanism.
