Moreover, it was categorically specified in sub- section (4) of section 234A of the Ordinance that such taxpayers shall not be entitled to claim any adjustment of withholding tax collected or deducted under any other head, during the Tax Year. The intention behind this legislation was that in lieu of tax collected on gas consumption bill of CNG station being treated as final tax, such taxpayers would not be entitled to adjust tax collected or deducted under any other section /provision of law against such final tax.
In spite of this, some confusion prevailed and there was litigation owing to varying interpretations with regard to the adjustment of taxes collected or deducted under other heads, particularly advance tax collected under section 235 of the Ordinance on electricity consumption against the final tax liability of CNG stations. In order to put this matter at rest, necessary amendment has been made through the Finance Act, 2017 whereby it has been explicitly stated that advance tax collected on the amount of gas bill as well as the electricity bill of a CNG station shall constitute final tax on the income of a CNG station. Therefore, forthwith:
(i) The tax collected from gas bills and electricity bills shall be a final tax on the income of CNG stations.
(ii) CNG stations shall be entitled to claim all adjustable advance taxes collected or deducted at source under any other head, except electricity.
It has also been clarified through the Finance Act, 2017 that the amount of gas bill subject to collection of advance tax under section 234A of the Ordinance shall mean the gas bill inclusive of sales tax and all other incidental charges. Such clarification has been inserted with a view towards explaining the existing law therefore it shall have retrospective effect.
The FBR has also explained the tax on electricity bills of commercial or industrial consumers to be treated as minimum tax on annual basis.
Prior to the Finance Act, 2017, tax collected from commercial or industrial consumers on electricity bills up to Rs 30,000 per month was treated as minimum tax (non-refundable). Consequently, if in any particular month the electricity bill exceeded this limit such tax became adjustable. For the sake of simplicity and greater ease in claiming adjustment of such tax whilst filing annual income tax returns the Finance Act, 2017 has specified such threshold on annual basis, ie, Rs 360,000 per annum. Henceforth, irrespective of monthly bills, if the aggregate amount of electricity bills exceeds Rs 360,000 per annum the tax collected shall be adjustable, otherwise it shall be minimum tax.
Furthermore, it has also been clarified through the Finance Act, 2017 that the quantum of electricity bill in the case of commercial, industrial or domestic consumers of electricity subject to collection of advance tax under section 235 and 235A of the Ordinance shall mean the electricity bill inclusive of sales tax and all other incidental charges. This amendment has been made to clarify that the amount of electricity bill subject to collection of advance tax under the Ordinance is treated to be an amount inclusive of sales tax and all other incidental charges, the FBR added.
Prior to the Finance Act, 2017, steel melters, re-rollers and composite steel units registered under the Sales Tax Special Procedure Rules, 2007 were subject to collection of non-adjustable tax @ Re.1 per unit of electricity consumed for the production of steel billets, ingots and mild steel in addition to tax payable otherwise on electricity consumption. Such tax is collected in lieu of their liability to withhold tax from payments made for local purchase of scrap under section 153(1) of the Ordinance.
Through the Finance Act, 2017 steel re-rollers have been excluded from the ambit of section 2358 of the Ordinance, since in the exclusive business of re-rolling purchase of scrap is not involved. Corresponding amendments have also been made in Clause (9A) of Part-IV of the Second Schedule, the FBR added.
Copyright Business Recorder, 2017