ISLAMABAD: The government’s demand to reduce electricity rates has met with shock as global lender IMF (International Monetary Fund) rejected Islamabad’s proposal to reduce sales tax. The Ministry of Energy has proposed a reduction in sales tax to the government. And the government sent a request to the IMF, which rejected it. The IMF said exemptions from the new taxes could not be granted under its loan program. If the sales tax is cut, it will not be possible to achieve tax collection targets, the IMF added. It may be noted that the consumer is charged GST twice on their electricity bills – once the 18 per cent tax is levied on the total invoice amount, while the second time the sales tax is levied on the fuel cost adjustment. OTHER CHARGES FROM ELECTRICITY BILLS The government collects Rs 954 billion annually from taxes levied on electricity bills. Of this amount, the federal government will receive Rs 391 billion, while the provinces will receive Rs 563 billion. According to a document issued by the government in August 2024, the consumer is subject to income tax, advance tax, additional tax, additional sales tax, retailer sales tax, electricity tax and PTV charge. The breakdown of taxes is as follows: Electricity: This is a provincial charge ranging from 1% to 1.5% of variable charges that applies to all consumers. PTV license fee: An additional fee of Rs 35 for domestic consumers and Rs 60 for commercial consumers is added to the bills. Finance Charge: It is levied at the rate of Rs 0.43 per kWh for all categories of consumers except emergency domestic consumers. Fuel Price Adjustment (FPA): A variable component reflecting the discrepancy between actual and reference fuel. Extra tax: Industrial and commercial consumers who are not registered in the list of active taxpayers of the Federal Board of Revenue (FBR) are subject to a tax rate of 5% to 17% depending on the different accounts. Surcharge: This surtax of 3% is imposed on all consumers without a Sales Tax Return Number (STRN), excluding domestic, agricultural, wholesale and on-street connections. Income tax: It is charged at different rates depending on the applicable tariffs and the amount of the electricity bill. Sales Tax: Commercial consumers are taxed at the rate of 5% on bills up to Rs 20,000 and 7.5% on bills above Rs 20,000.
