Heavy taxes on solar consumers in Pakistan are imposed as solar sector in under emmense pressure. The authorities has rises the tax on net metering adjustmnets. As of the decision now the consumers of net metering can now bear 18% slaes tax while giving backenergy to the national grid as well. Read our comprehensive guide for more details.
The Federal Tax Ombudsman
Heavy taxes on solar consumers in Pakistan are imposed as FTO ( The Federal Tax Ombudsman ) revealed the loss of 9.8 billion in revenue and instructed the power distribution companies across the country to charge an 18 percent sales tax from consumers who are using both the electricity and net metering systems in Pakistan.
On Monday, the FTO stated (FBR) and (DISCOs) to take immediate action and make sure the previous tax on net metering policies and deduction system cannot be used and the new tax should be imposed on the gross value of electricity that can be supplied to the net metering consumers.
Tax on Net Metering 1990 Sales Act
Following the 1990 Sales Act tax on net metering must be imposed on all the amount of electricity that consumers used that was supplied by distribution companies, any surplus amount of energy supplied back to the grid cannot be valued, and also there is no longer acknowledgment of previous net metering policies.
K-ELECTRIC CONSUMER COMPLAINT
One of the K-electric consumers filed a complaint against K-electric for charging more amount of taxes on net metering adjustments while other DISCOs are not charging any single penny from their respective users. While taking all these things into account the FTO made their decision and said that K-electric is not charging any extra amount from users and is following the laws about net metering policies.
While other DISCOs are not following the rules and regulations made by the authorities and in the end, FTO imposes tax and said fiscal laws have greater authority and power than regulatory laws.
FTO Decision
According to the Income Tax Ordinance of 2001 and under section 235 the FTO said the tax must be imposed on all the electricity amounts supplied by distribution authorities to the consumers of solar energy that are using net metering facilities and can not be adjusted on net metered value. Now, this decision might not support the earlier decision of NEPRA and AEDB departments, as FTO meant to be said that fiscal laws have more authority and power than regulatory provisions or authorities.
Report of FTO on DISCOs and Desicion
According to the report of FTO, only K-electric is charging all the amount of sales and income tax on bills, and 11 others out of 12 DISCOs failed to charge the legal tax charges from net metering users. This decision is made on the complaint of K-electric consumers who complained about unfair treatment, arguing that the framework of 2015 of K-electric supports the net metering adjustments. However, the FTO denies this argument and says that the fiscal law has more authority and power than the regulatory laws and then imposes taxes.
Direction to FBR
After the decision, the instruction is given to FBR to take action against all other DISCOs Including (LESCO) (IESCO) (FESCO0) and the remaining other companies as well. The inquiry has been launched on these companies for non-discrimination action of not taking taxes from their respective net metering consumers.
But both the FBR and NEPRA cannot issue any official statement on this decision. This decision can have a significant impact on the sector of renewable energy in the country as it might discourage users from going for free energy.
Conclusion
Solar energy is a growing sector of energy in the country. Many people think that net metering can help reduce their bills and also help the national grid as well. However, the decision of the FTO can impose a huge burden on net metering users. As solar energy is the alternative solution to highly costly conventional energy and Pakistan is suffering from inflation it become a huge bomb for users.
The experts said it might be a highly disagreeable sign for users to adopt solar energy as they see this might be the only solution in the country for energy and they might not adopt it in the future because of high taxes reaching 18% and might be going further as well in future.
