The old sales tax scheme for small traders, restored through the recently promulgated Presidential Ordinance, would be applicable retrospectively from 1 July 2022.
According to the explanation of the Tax Laws (Second Amendment) Ordinance, 2022, issued by leading tax expert Ashfaq Tola, before Finance Act 2022, Section 3 of the Sales Tax Act charged tax on retailers (other than Tier 1) from monthly electricity bills, and the electricity supplier was obliged to deposit the amount collected directly without adjustment against his input tax.
The Finance Act 2022 levied a fixed tax on retailers (other than Tier-1) from their monthly electricity bills, he said. A proviso was added in Section 3(9) of the Sales Tax Act in addition to the already existing provisos. This proviso added to Section 3(9), which stated that rates of tax on monthly electricity bills shall be increased by 100 percent for individuals not on the Active Taxpayers List (ATL), issued by the FBR, on the date the electricity bill is issued. The Sales Tax Act also empowered the Board to collect up to Rs. 200,000 per month from the electricity bill against any person or class of persons as notified by the Board.
The Ordinance has now reversed the charges levied vide FA 2022. Now, sales tax shall be collected from retailers (other than Tier–I Retailers) at earlier rates. This amendment has been given retrospective effect, which means that the rates will be deemed to be effective from 1 July 2022. It has further been provided that the above tax will be in addition to the sales tax, further tax, and extra tax charged in the normal manner, Tola added.
Under the Ordinance, the tax shall be charged from retailers, excluding Tier-1, through their monthly electricity bills, at a rate of 5 percent where the monthly bill amount does not exceed Rs. 20,000, and at the rate of 7.5 percent, where the monthly bill amount exceeds Rs. 20,000. The electricity supplier shall deposit the collected amount directly without adjusting it against his input tax.
Provided that the tax under this subsection shall be in addition to the tax payable on the supply of electricity. Provided further that the Commissioner of Inland Revenue having jurisdiction shall issue an order to the electricity supplier regarding the exclusion of a person who is either a Tier-1 retailer or not a retailer, Tola added.