Solar net metering consumers ordered to pay 18% sales tax 

The Federal Tax Ombudsman (FTO) Tuesday directed all electricity distribution companies, including K-Electric, to collect 18% sales tax on the gross supply of electricity to consumers, irrespective of net metering adjustments, reported 24NewsHd TV channel.

In its ruling, the FTO stated that government-run distribution companies (DISCOs) are not collecting sales tax from consumers in accordance with the law, resulting in an annual revenue loss of Rs. 9.38 billion to the national treasury.

The FTO emphasized that net metering should not impact the collection of sales tax and that the levy must be applied on the total electricity supplied rather than the net value after adjustments.

The order further clarified that under existing sales tax provisions, there is no exemption for electricity supplied through net metering, and the tax must be collected on the gross amount.

The FTO specifically noted that K-Electric has been correctly implementing the 18% sales tax on consumer electricity bills, in line with legal requirements.

The FTO has also instructed the Federal Board of Revenue (FBR) to investigate the failure of government DISCOs to collect the full sales tax and submit a report within 60 days.

The decision follows a complaint lodged by a K-Electric consumer regarding the collection of sales tax on the gross supply of electricity.

The ruling reaffirms that all DISCOs must ensure strict compliance with sales tax laws to prevent further financial losses to the exchequer.