ECC orders revision of summary regarding sales tax on subsidies given to DISCOS

ISLAMABAD: The Economic Coordination Committee (ECC) has directed the Ministry of Energy to resubmit the summary regarding the levy of sales tax on subsidies granted by government to DISCOS.

The meeting of ECC was held under the chair of the Federal Minister for Economic Affairs Omar Ayub Khan here on Wednesday.

As per details, the Ministry of Energy informed the meeting that sales tax cannot be levied on the subsidy provided to an electric supply distribution company by the federal government, therefore, the said tax can neither be charged from the companies nor end consumers.

However, FBR has issued notices amounting to Rs167 billion in sales tax to DISCOs over tax deducted at source (TDS), a matter which is being contested in various courts.

The Energy Ministry asked the ECC to inform FBR that subsidies provided to consumers by federal and provincial governments are not liable to sales tax pursuant to Sections 2 (46) and 3 of the Sales Tax Act-1990 so the tax department should issue instructions to field formation accordingly.

However, a handout issued by the Finance Division states that ECC directed the Energy Ministry to resubmit the summary after revising the proposals.

Other summaries that the ECC directed to resubmit included the proposal pertaining to contractual obligations of Heavy Electrical Complex (HEC)’ Provision of un-targeted subsidy for November and December, 2021, under the PM’s relief package, exemption of duties and taxes for uninterrupted supply of oxygen gas for medical purposes, and a proposal seeking permission to amend the petroleum concessions agreement allowing GHPL to work interest in Wali, Jandran West, Saruna and Pezu blocks of OGDCL.  

These proposals were submitted by the Ministry of Industries & Production and the Ministry of Petroleum.

Reviewing other summaries, the ECC approved the proposal submitted by the Ministry of Energy regarding the increase of OMC’s and Dealers’ margins for Motor Spirit (MS) and High Speed Diesel (HSD) with effect from forthcoming revision in oil prices. 

The meeting also approved a summary presented by the Ministry of National Food Security & Research for the purchase of 175,000 MT wheat by World Food Programme (WFP) from PASSCO’s stock for Pakistan and Afghanistan. 

The wheat flour will complement the WFP’s food basket for distribution to the food vulnerable population in the two countries. 

The chair also approved the summary tabled by the Poverty Alleviation & Social Safety Division for the inclusion of beneficiaries of Ehsaas Kafalat Programme with PMT score between 29.01 to 37 under the recent NSER survey in Ehsaas Emergency Cash (EEC-2) Programme. 

These beneficiaries are proposed to be provided one-time emergency cash assistance of Rs12,000 on a first come first served basis to help mitigate the socioeconomic impact on vulnerable segments of society amid the ongoing pandemic.