FBR sets 1% value addition tax conditions for coal imports to IPPs 

The Federal Board of Revenue (FBR) has issued a procedure and conditions for applying 1% minimum value-added tax on coal imports meant exclusively for direct supply to coal-fired independent power producers licensed by the National Electric Power Regulatory Authority (Nepra).

The procedure was issued through Sales Tax General Order No 9 of 2026 by the FBR’s Inland Revenue Policy Wing on July 7, 2026.

According to the order, the 1% minimum value addition tax will apply under clause 6 of the 12th Schedule to the Sales Tax Act, 1990.

The order applies to coal falling under Chapter 27 of the Pakistan Customs Tariff, provided it is imported exclusively for and directly supplied to coal-fired independent power producers.

The FBR said the concession will be available only where the importer is registered under the Sales Tax Act, 1990.

The imported coal must be supplied directly to a coal-fired independent power producer holding a generation licence issued by NEPRA.

At the time of import, the importer will be required to submit documentary evidence to the Collector of Customs.

This may include a purchase order, supply agreement, contract or any other document proving that the coal is intended exclusively for direct supply to a licensed coal-fired independent power producer.

The importer will also be required to maintain complete documentary records relating to the import and subsequent direct supply of the coal.

These records must be produced on demand before the Commissioner of Inland Revenue or the Collector of Customs, as the case may be.

The FBR said importers must comply with verification or audit requirements prescribed under the Sales Tax Act, 1990 and rules made under it.

The order allows the Collector of Customs to assess imported coal under clause 6 of the Twelfth Schedule on the basis of documents submitted by the importer.

However, the Collector may later verify compliance through a post-clearance audit or in coordination with Inland Revenue authorities.

The FBR also laid down recovery provisions in case the conditions are violated.

If imported coal is supplied to any person other than a coal-fired independent power producer, or if it is established that the coal was not imported exclusively for direct supply to such a producer, the importer will be liable to pay the differential amount of minimum value addition tax.

The same recovery will apply if any condition prescribed under the general order is not fulfilled.

The recoverable amount may include a default surcharge and penalty, if applicable, under the Sales Tax Act, 1990.

For the purpose of the order, a coal-fired independent power producer has been defined as an independent power producer generating electricity from coal under a NEPRA-issued generation licence.

The general order has come into force with immediate effect.