{"id":6320,"date":"2025-02-25T17:13:08","date_gmt":"2025-02-25T17:13:08","guid":{"rendered":"https:\/\/www.newsmakers.com.pk\/en\/?p=6320"},"modified":"2025-02-25T17:13:14","modified_gmt":"2025-02-25T17:13:14","slug":"fto-imposes-18-sales-tax-on-solar-net-metering-users","status":"publish","type":"post","link":"https:\/\/www.newsmakers.com.pk\/en\/business\/fto-imposes-18-sales-tax-on-solar-net-metering-users\/6320\/","title":{"rendered":"FTO Imposes 18% Sales Tax on Solar Net Metering Users"},"content":{"rendered":"\n<p><strong>Web Desk<\/strong>: The <strong>Federal Tax Ombudsman (FTO)<\/strong> has ordered the <strong>implementation of an 18% sales tax<\/strong> on consumers utilizing <strong>solar net metering<\/strong> across Pakistan, following a <strong>revenue shortfall of Rs 9.8 billion<\/strong>, as reported by <em>Business Recorder<\/em>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Immediate Implementation of Sales Tax on Gross Electricity Supply<\/strong><\/h3>\n\n\n\n<p>In its directive, the <strong>FTO has instructed power distribution companies (DISCOs) and Federal Board of Revenue (FBR) field formations<\/strong> to enforce this tax <strong>immediately<\/strong>. The order specifies that <strong>sales tax must be applied to the gross value of electricity supplied by DISCOs<\/strong>, without factoring in the offset from net metering\u2014a system that allows solar panel users to adjust their electricity bills based on the energy they generate.<\/p>\n\n\n\n<p>The FTO emphasized that <strong>sales tax is applicable on the total electricity supply value<\/strong> rather than on a <strong>net basis<\/strong>, meaning <strong>all DISCOs, including K-Electric, must charge sales tax on the full amount<\/strong> of electricity supplied, disregarding net metering adjustments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Income Tax to Be Calculated on Gross Supply<\/strong><\/h3>\n\n\n\n<p>Additionally, the same rule applies to <strong>income tax withholding under Section 235 of the Income Tax Ordinance, 2001<\/strong>, which <strong>must also be levied on the gross electricity supply value<\/strong>, independent of net metering credits.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Nepra Lacks Authority Over Taxation, FTO Asserts<\/strong><\/h3>\n\n\n\n<p>The <strong>National Electric Power Regulatory Authority (Nepra) lacks the authority<\/strong> to impose or regulate sales and income tax, the FTO clarified. It stated that any taxation-related <strong>notifications from Nepra or the Alternative Energy Development Board cannot override the Sales Tax Act, 1990, or the Income Tax Ordinance, 2001<\/strong>. The ruling aligns with <strong>Supreme Court decisions<\/strong>, reaffirming that <strong>fiscal laws precede general regulations<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>FBR Directives Are Mandatory for All DISCOs<\/strong><\/h3>\n\n\n\n<p>The FTO highlighted that the <strong>FBR&#8217;s instructions are binding<\/strong> under <strong>Sections 72 of the Sales Tax Act and 214 of the Income Tax Ordinance<\/strong>. Therefore, <strong>all tax authorities must comply with the directives<\/strong>.<\/p>\n\n\n\n<p>While <strong>K-Electric has been correctly applying sales and income tax on electricity bills<\/strong>, the <strong>remaining 11 DISCOs have failed to implement these legal provisions<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Complaint Filed Against Unlawful Sales Tax Collection<\/strong><\/h3>\n\n\n\n<p>A <strong>complaint has been lodged under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000<\/strong>, challenging the <strong>illegal sales tax collection on total electricity consumption without recognizing the net metering system<\/strong>.<\/p>\n\n\n\n<p>This directive is expected to <strong>significantly impact solar panel users<\/strong>, potentially increasing their electricity bills despite generating their power.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Web Desk: The Federal Tax Ombudsman (FTO) has ordered the implementation of an 18% sales tax on consumers utilizing solar net metering across Pakistan, following a revenue shortfall of Rs 9.8 billion, as reported by Business Recorder. Immediate Implementation of Sales Tax on Gross Electricity Supply In its directive, the FTO has instructed power distribution &hellip;<\/p>\n","protected":false},"author":1,"featured_media":6321,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-6320","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>FTO Imposes 18% Sales Tax on Solar Net Metering Users<\/title>\n<meta name=\"description\" content=\"The Federal Tax Ombudsman (FTO) has directed an 18% sales tax on solar net metering consumers after a Rs9.8 billion revenue loss. 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