Officials from the Power Division informed the visiting International Monetary Fund (IMF) mission on Tuesday about changes in the solar power policy and highlighted that power consumers in Pakistan contribute Rs800 billion annually to the government through taxes on electricity bills. This taxation leads to an increase of Rs8 per unit in electricity tariffs. They conveyed to the IMF that removing these taxes could reduce the tariff by Rs8 per unit. In addition to taxes, power consumers also pay electricity duty, PTV fees, and various surcharges on their bills.
However, officials stated that it is not feasible to completely eliminate all taxes from electricity bills. Instead, they suggested reducing the taxation by Rs100-200 billion annually, which would provide relief of Rs1-2 per unit to consumers. They also proposed that tax authorities should broaden the tax base by including retailers, the real estate sector, and agriculture.
The Federal Bureau of Revenue (FBR) cannot eliminate the 17% General Sales Tax (GST) from electricity bills, as it generates Rs600 billion in revenue for the government. However, other taxes amounting to Rs100-200 billion could be removed from the bills. Official sources told The News that the country’s power sector is currently unsustainable, unreliable, and unaffordable, necessitating consideration of all options to ensure affordable electricity.
Electricity Duty (ED), a provincial duty ranging from 1.0% to 1.5% of Variable Charges, is paid by power consumers. Additionally, a 17% GST is imposed on all consumers under the Sales Tax Act 1990. Domestic consumers pay Rs35, and commercial consumers pay Rs60 as a PTV license fee in their electricity bills.
A financing cost surcharge of Rs0.43 per kWh is applied to all consumer categories except lifeline domestic consumers. Industrial and commercial consumers not registered on the FBR’s active taxpayer list are charged an Extra Tax ranging from 5% to 17% based on different bill amount slabs. Further tax at a rate of 3% is charged to all consumers without a Sales Tax Return Number (STRN), except domestic, agriculture, bulk consumers, and street light connections. Commercial consumers face a 5% Sales Tax on bills up to Rs20,000 and a 7.5% tax on bills exceeding Rs20,000.
