Revenue board suspends zero-rated sales tax

KARACHI: Federal Board of Revenue (FBR) suspended zero-rated sales tax on consumption of electricity allowed to over 100 textile units as they were found misusing the facility, officials said on Wednesday.

The officials said the FBR suspended the facility for 109 units, which are registered with the regional tax office (RTO) Faisalabad.

FBR suspended the facility through three different notifications and on the recommendation of the RTO, according to the officials.

The government allowed zero-rated sales tax facility on consumption of electricity and gas to textile units in order to reduce their cost of manufacturing and to make Pakistani products competitive in international markets.

Most of the units for which the facility was withdrawn are related to dying and weaving industry.

FBR sources said the factories were misusing the facility by supplying electricity to unregistered units or using it for unclassified purposes.

FBR, a sales tax general order on September 13, 2007, started the facility of zero-rated sales tax on consumption of electricity by textile units.

The order bounded power distribution companies to charge sales tax at zero percent on certain conditions, including an electricity connection should be in the name of the registered person and electricity bill issued by electricity provider contains the name and the sales tax registration number of such an individual. If the electricity connection is not in the name of an individual, his registration number should be mentioned in the electricity bill along with the address registered with the sales tax department.

The FBR directed the chief commissioner of RTO Faisalabad to initiate recovery against the units against misuse of sales tax.

Besides, the revenue body also directed Faisalabad Electric Supply Company to charge a normal sales tax rate of 17 percent on supply of electricity to the textile units.