The federal government has recently met another condition of the International Monetary Fund (IMF) for the reduction of circular debt as it has introduced new rules for the collection and payment of tax on electricity.
According to a document available with The Express Tribune, the Federal Board of Revenue (FBR) has issued Special Procedure Rules 2023, which outlines changes to the tax collection procedure.
Under the new rules, the FBR will collect sales tax from the electricity distribution companies (DISCOs) on the actual amount received from consumers instead of the amount accrued on electricity bills.
For this purpose, DISCOs will gradually link electricity meters across the country with the Computerised National Identity Card (CNIC) numbers of consumers instead of the reference number or meter number.
Subsequently, electricity bills will be issued to consumers on their CNIC number. In case of tenants, their computerised numbers will also be recorded on the electricity bills.
If a tenant defaults on bill payment, a bill will be issued on their identity card and the tenant will be considered as a defaulter.
DISCOs will submit details of delinquencies of electricity bills to the FBR on a monthly basis. The FBR and related institutions, including PTV, will then take action to recover the dues on their own from the defaulters.
After implementation of the rules, sales tax will be collected from the electricity distribution companies on the amount recovered from the consumers instead of the amount billed. The new rules are aimed at reducing the circular debt and revenue loss suffered by DISCOs.
According to a senior FBR officer, these amendments have been made on a condition of the IMF to reduce the circular debt. Previously, a large number of consumers of DISCOs did not pay their electricity bills, resulting in a double loss of revenue to DISCOs.
Published in The Express Tribune, April 1st, 2023.
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