Retailers in limbo as fixed sales tax cancellation notification delayed

Following the implementation of the fixed tax on traders introduced in the 2022 finance law, some unease has been observed in the country.

After several protests held in different parts of the country, Federal Finance and Revenue Minister Miftah Ismail assured traders and small retailers to remove all taxes levied on electricity bills. However, to date, no such notification has been issued by the Ministry of Finance and as a result electricity distribution companies continue to charge it on their bills to retailers.

In the absence of this notification, around 1.5 million retailers are boycotting to pay their electricity bills, resulting in a circular debt growth of around 1.4 billion every day. It is estimated that, so far, 20 billion has already been added to the circular debt, in particular because of this persistent problem.

In accordance with the Finance Act 2022, effective July 1, 2022, the federal government introduced fixed slabs to increase the collection of taxes from retailers. Whereas retailers were previously charged based on a percentage linked to their consumption, three slabs have been introduced in this recent revision with a minimum tax liability of PKR 3,000, even though the energy consumption of commercial consumers was 0 unit. Additionally, the tax amount was doubled if the retailer’s name did not appear on the FBR’s Active Taxpayer List (ATL).

Widespread public outcry from retailers across Pakistan, protests and backlash from social media led Federal Finance and Revenue Minister Miftah Ismail to issue several statements on the cancellation of this sales tax. According to his statement on Twitter, initially the tax was supposed to be waived for users with power usage below 150. However, his later statement reversed this for all retailers for a year.

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