SOHAIL SARFRAZ
ISLAMABAD: The Federal Board of Revenue (FBR) has received a strong recommendation of a Regional Tax Office (RTO) to conduct comprehensive audits of each electric power generation company (GENCO) falling in the jurisdiction of various Large Taxpayer Units (LTUs) and RTOs to check evasion of sales tax on supply of electricity.
Sources told Business Recorder here on Sunday that the FBR Member Taxpayer Audit has received a report on the huge revenue potential of electric power generation companies and recommendation of comprehensive audit by the RTO Peshawar.
The report said that according to section 3 of Sales Tax Act,1990 read with rule 13(2)(b) Of Chapter-III, Special Procedure for Collection and Payment of Sales Tax on Electric Power notified vide SRO.480(1)/2007 dated 09.06.2007, every generation, transmission and distribution company is liable to collect and pay sales tax on the supply of electricity. Presently, GENCOS, including those under the ambit of WAPDA, IPPs, Captive power projects, Rental Power Projects (RPPs) and Hydroelectric power projects registered and operational countrywide falling in the jurisdiction of various LTUs/RTOs, are reportedly indulging in various kinds of malpractices.
It merits mentioning that reportedly this phenomenon is prevalent countrywide in all the electric power generation companies registered under the head of electric energy falling in the territorial jurisdiction of various LTU’s/RTO’s and reportedly either net collection of sales tax from this sector is negligible compared to its potential, it said.
The report said that in order to curb the phenomenon of tax evasion and to ascertain the veracity of their input tax adjustment claims and other relevant aspects & also to probe grey areas, comprehensive audits need to be carried out in respect of each electric power generation company (GENCO) falling in the jurisdiction of various LTUs/RTOs as reportedly the modus operandi is being adopted by them to evade the payment of due amount of sales tax. Therefore, the following aspects of irregularities need to be scrutinized during audit of such power generation companies:
1. Non-payment of due Sales Tax on generation and supply of Electric Power.
2. Inadmissible input tax adjustment.
3. Non-Payment of sales tax on self-consumption of electricity.
4. Contravention of various provisions of Sales Tax Act, 1990 read with Chapter-III of Sales Tax Special Procedure Rules, 2007 notified vide SRO.480(I)/2007 dated 09.06.2007.
In order to curb the phenomenon, detailed and comprehensive audits may be ordered by the Board to be carried out in respect of each electric power generation company at LTU/RTO level as it is earnestly believed that replication of such comprehensive audit exercise countrywide will surely lead to mega detection of sales tax revenue amounting to billions of rupees which is being evaded on different pretexts by these GENCOs, RTO Peshawar added.
