The first issue was related to the payment of sales tax on subsidy provided by the federal government. On this issue, the Ministry of Water and Power contended that the tariff subsidy is actually provided to electricity consumers and is not part of the total sales tax and that the appellate tribunal inland revenue (ATIR), Islamabad, accepted the appeal of Peshawar Electric Supply Company (PESCO) in this regard. The FBR suggested that DISCOs may pursue their cases in respective appellate fora on the strength of cited ATIR judgement. However, the FBR shall not force recovery till the matter is decided by such appellate fora.
The FBR has also decided to provide technical assistance to the power distribution companies (DISCOs) for complete filing of sales tax returns which is mandatory for these companies. On the issue of non-filing of Annexure-C by DISCOs, sources said that in spite of the previous assurances, most of the DISCOs are not filing complete annexure C of the sales tax returns which is mandatory for all the registered persons. It was decided that filing of the said annexure would be ensured and if DISCOs are facing any problem, the FBR will render technical assistance.
Sales Tax on cash Collection Basis: Ministry of Water and Power was of the view that the sales tax be charged on the basis of actual cash collection and not on the billed amount or accrual basis. The FBR contended that as per the statute, sales tax is charged on accrual basis which is prevalent for all the taxpayers and that any deviation may open a new Pandora's box. The ministry presented a copy of earlier note in which FBR had agreed to the proposal to exempt supplies for which payment is not received in 180 days. The FBR opined that proposal in the said note was complicated and not practical. Accordingly, it was agreed that the ministry may refer the matter to ECC for appropriate decision. Sales Tax not charged on supply to AJ&K: As per distribution companies, the President on 26.09.2002 decided that electricity generated and supplied to AJ&K will be exempted from levy of sales tax.