In a complaint filed by Sh. Iftikhar Ahmad C/o M/s Al-Sheikh Jinnah Memorial Hospital Sialkot, the FTO has observed that the mooting point is whether electricity is excluded from the definition of "goods". The section 2(12) of Sales Tax Act, 1990, defines "goods" to include every kind of movable property other than actionable claims, money, stocks, shares and securities.
The Sales of Goods Act, 1930, defines "goods" to mean every kind of moveable property, other than actionable claims and money, and includes electricity, water, gas, stocks and shares, growing crops, grass and things attached to, or forming part of the land.
More importantly, however, goods exempt from the levy of sales tax are covered under the Sixth Schedule of Sales Tax Act, read with reference to 1st Schedule to the Customs Act, 1969 (Pakistan Customs Tariff : Heading 27.16). It is thus obvious that electricity falls under the definition of goods, and supply of electricity to charitable hospitals having 50 beds or more is exempt from the levy of sales tax (entry No 52-A of the Sixth Schedule to the Sales Tax Act, 1990), FTO added.
On the other hand, the FBR clarified that exemption on the supply of goods to charitable hospitals under Sr. No 52-A of the Sixth Schedule to the Sales Tax Act, 1990, was conditional whereas exemption certificate issued by the RTO Sialkot was silent on that score. The FBR further clarified that such matters fall within the domain of FBR, to maintain a uniform policy across the country.
The FTO has ruled that the rejection of the complainant's application for grant of exemption of Sales Tax on supply of goods, including electricity, based on unreasonable grounds tantamount to maladministration in terms of Section 2(3) of the FTO Ordinance, 2000.
The FTO has recommended the FBR to allow exemption of sales tax on supply of goods, including electricity, to charitable hospitals having 50 beds or more, as provided in entry at Sr. No 52-A of the Sixth Schedule to the Sales Tax Act, 1990 and report compliance within 30 days. Details of the case revealed that the complaint was filed alleging maladministration for rejection of complainant's application for grant of exemption of Sales Tax on the supply of electricity under Sr. No 52-A of the Sixth Schedule to the Sales Tax Act, 1990.
The complainant, a charitable hospital, requested the RTO Sialkot for grant of exemption on the supply of electricity under the provisions of exemption specified against Sr. No 52-A of the Sixth Schedule to the Sales Tax Act, 1990. After examining the request, the RTO Sialkot allowed exemption of sales tax on supply of electricity to the hospital. The complainant approached the Gujranwala Electric Power Company (GEPCO) for exemption of Sales Tax on supply of electricity on the basis of exemption certificate issued by the RTO Sialkot.
The GEPCO authorities forwarded the case of the complainant to the FBR for clarification. The FBR had directed the RTO Sialkot to withdraw exemption certificate and forward the case to the FBR. The complainant submitted fresh application to the FBR through RTO Sialkot. The case was examined by the FBR and request for exemption regretted on the ground that no such exemption was available to any of the charitable hospitals.
The Chief Commissioner, Regional Tax Office, Sialkot, in his comments stated that goods defined in sub-section (12) of Section 2 of the Sales Tax Act, 1990, included every kind of moveable property other than actionable claim, money, stocks, shares and security. As electricity was not included in the above definition, it could not be considered as goods for the purpose of exemption. The FBR, therefore, had rightly rejected the request of the complainant.
During hearing, the authorised representative (AR) contended that the electric was specified in the Pakistan Customs Tariff against heading 27.16 and prior to Finance Ordinance, 2000, it was exempt from Sales Tax under Sixth Schedule to the Sales Tax Act, 1990.
Though this exemption of Sales Tax was withdrawn through the Finance Ordinance, 2000 (relevant entry No 10 in the Sixth Schedule to the Sales Tax Act, 1990, was deleted), making the supply of electricity generally chargeable to Sales Tax at the standard rate, the subsequent addition of entry at Sr. No 52-A of Sixth Schedule in 2008 exempted it for charitable hospitals having 50 beds or more. The FTO has directed the FBR to allow exemption of Sales Tax on supply of goods, including electricity, to charitable hospitals of 50 beds or more, as provided in entry at Sr. No 52-A of the Sixth Schedule to the Sales Tax Act, 1990.