KARACHI: Karachi Tax Bar Association (KTBA) has moved against notices issued by the Inland Revenue to Malls, Amusement Parks etc asking them to collect income tax on electricity bill.
KTBA President in a letter addressed to Afaque Ahmed Qureshi, Member (Inland Revenue – Policy), Federal Board of Revenue sought redressal at the earliest.
KTBA president Syed Raza Hussain Jafri maintained in his letter that the said notices have been issued despite the fact that it remains sole responsibility of the licensed person making the bill for power consumption, generated by it.
A plain reading of the above clearly suggests that the person preparing the electricity consumption bill shall collect advance tax on the amount of electricity bill of either a commercial, industrial or domestic consumer and, therefore, once the power company like KE has done the collection of tax on its bills, it cannot be further collected by the second and the third persons be it shopping malls or Parks writes the KTBA president.
He pointed out that certain field formation in Karachi jurisdiction, however, wherein few commissioners have issued notices without paying heed to the above. It remains important that the same commissioner have although accepted the submission that no sales tax is required to be charged by the same malls and parks under the Sales Tax Act, 1990.
The malls, on the other hand, provide space (shops/Area) to their tenants for their economic activity, on rent. They do not sell electricity to them and only installs sub-meter for them and that too with the permission of KE to measure the units of electricity consumed by each tenant (Shop & Office) so that K-Electric bill singularly sent to the mall in a lumpsum against a ‘Bulk Meter’ can be allocated accurately to each consumer as per its actual consumption. The allocation is claimed by issuing reimbursement notes to the tenants, the letter said.
The power supply from KE, the malls and amusement parks also install their own generator to ensure backup of power supply to its tenants in the above of KE supply for which again reimbursement notes are issued for claiming the cost of diesel used in the generator. Needless to mention the allocated diesel cost is also measured through the same sub-meters as there is no other means to do so, says the letter adding that malls and parks are not engaged in the business of supply of electricity as it is not their business to supply electricity nor do they have the necessary permission (license) from NEPRA under Electric Power Act, 1997 for Generation, Transmission and Distribution of electricity to do so. It is also important to mention, it is factually a compulsive exercise, which malls undertake in absence of separate KE meters installed at each of their shops/office. Had such separate KE meters would be installed directly by KE itself such compulsive exercise would never have to be undertaken by mall and the parks in the first place, it added.
Seeking indulgence and prompt intervention KTBA president requested for issuance of a clarification that these malls/amusement again Parks/Office building are not required to collect income tax under section 235 of the Ordinance while issuing reimbursement note to their tenants for collecting the amount of electricity consumed by them, provided to them either through K-electric supply or through own back-up generators as they are neither engaged in the business of supplying electricity nor do they have any license from NEPRA to do so. It is bound to secure the amount through reimbursement note owing to the fact that KE has not installed separate meters to each of their shops and offices. (the income tax has already been charged by the KE power bills to the Malls or the Parks, under section 235 of the Ordinance.