FBR| Additional 4% Tax on Electricity Bills for Inactive Taxpayers

Blog By Muhammad Taif

LATEST NEWS IN TAX September 1, 2023

The Federal Board of Revenue (FBR) introduced a new  tax effective from September 1, 2023. According to an official document, people not on the active taxpayer list (ATL on Sales Tax) will be charged an extra 4% tax on their electricity bills. This additional tax is considered part of the sales tax and will be added to the regular 18% sales tax rate.

Fundamental Sales Tax Rules for 2023-24

The revised Sales Tax Act for the 2023-24 fiscal year, as clarified by the FBR (Federal Board of Revenue), outlines the coverage of this tax. According to the document, sales tax is levied at a rate of eighteen percent on:

  • Taxable items sold by a registered business as part of their taxable operations.
  • Goods are brought into Pakistan regardless of where they end up.

Additional Tax for Non-Registered Buyers

The document also explains that if you sell things to people who haven’t registered for a tax number or aren’t actively paying taxes, you’ll need to pay an extra four percent tax on the value of those sales. This additional tax is on top of the regular sales tax rate.

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Practical Implementation of Tax Changes in 2023

Nevertheless, the national government still has the power to decide which goods and services will not be subject to the extra tax.

It’s important to mention that the extra tax rate went up from three percent to four percent with the 2023 Finance Act, starting on July 1, 2023. This change has resulted in higher electricity bills for people legally required to register for sales tax but still need to do so.

Understanding Sales Tax: What You Need to Know Before Filing Your Return

Before registering and filing your Sales Tax Return, you must understand how this process works. Having a basic knowledge of these concepts not only makes the tasks more accessible but also ensures that you follow the correct procedures.

Sales Tax is a tax imposed by the Federal Government in Pakistan, as per the Sales Tax Act 1990. It applies to the sale and supply of goods and goods imported into the country. Additionally, there’s a Sales Tax on services, which the Federal Government enforces through The Islamabad Capital Territory (Tax on Services) Ordinance of 2001.

sales tax

Understanding Sales Tax and Exemptions

All items are subject to a sales tax, except those listed as exceptions in Section 13 of the Sales Tax Act, 1990, as outlined in the 6th Schedule. Regarding sales tax, items include all types of things you can move around, except for IOUs, money, stocks, shares, and securities.

Imported Items and Sales Tax Obligations

When you bring items into Pakistan from another place, you must pay sales tax unless they’re specifically listed as exempt in Section 13 of the Act.

Exemptions and Notifications under Section 13

Section 13 of The Sales Tax Act 1990 and the Sixth Schedule of the Tax Act 1990 clearly state which items are exempt from sales tax. There are also other exemptions that the government provides through various notifications (SROs) issued under Section 13.

Registration Process Of Sales Tax

To register, you need to use your Iris Portal login details. After logging in, choose “Form 14(1) (Form of Registration filed voluntarily through Simplified) (Sales Tax)” from the Registration menu.

Once you select “Form 14(1) (Form of Registration filed voluntarily through Simplified) (Sales Tax),” you will be prompted to provide the following information:

For Individuals:

  • Specify your registration type, whether you are a Manufacturer or Non-Manufacturer.

For Associations of Persons (AOP) or Companies:

  • Provide the CNIC of the Member, Director, or Principal Officer.
  • Indicate your registration type, whether you are a Manufacturer or Non-Manufacturer

Bank Account Details:

  • Include the Bank Account Certificate issued by your bank in your business’s name.

Business Information:

  • Share details such as your Business Name, Acquisition Date, Capacity, and Business Activity.
  • If you have multiple branches at different locations, provide information about each branch.

Your Business Location:

  • Provide your Registration or Consumer Number with your gas and electricity supplier.
  • Include pictures of your utility meters.

For Manufacturers:

  • Additionally, submit GPS-tagged photographs of your machinery.
  • Include details of your industrial electricity or gas meter.

The system will process your Sales Tax registration once you’ve gathered and submitted all the required information and documents.

Disclaimer: All information is provided on this portal solely for informational purposes. This portal is not affiliated with the Government website. Please note that this disclaimer also applies to our website, and we may refer to it as ‘us’, ‘we’, ‘our’ or ‘website’. The information on the website has been gathered from various government and non-government sources. We disclaim any liability for errors, injuries, losses, or damages arising from the use of this information. We also disclaim any liability for the availability and authenticity of this information. Our services consist of filling out forms, providing legal advice, and assisting our clients. The departmental processing of the registration forms is not our responsibility. You will have to use a service fee for professionally preparing your application, submitting it to the relevant authorities, and coordinating your application process. You will have to pay any Government fees.