Solar net metering consumers in Pakistan have been ordered to pay an 18 percent sales tax, media reported on Tuesday.
As per the report, the Federal Tax Ombudsman (FTO) has issued a directive that consumers utilizing solar net metering across the country would be subject to an 18% sales tax following the discovery of a significant revenue loss amounting to Rs 9.8 billion.
The FTO has instructed power distribution companies (DISCOs) and the Federal Board of Revenue (FBR) field formations to implement such changes “immediately,” the report added.
It has been clarified in the orders that sales tax must be applied to the gross value of electricity supplied by DISCOs, without considering the net metering arrangement—where consumers with solar panels offset their electricity consumption with the power they generate.
The FTO reiterated that the sales tax is “mandated on the total supply value, not on a net basis,” which means that all DISCOs, including K-Electric, are required to charge sales tax on the full amount of electricity supplied, disregarding any offsets from net metering.
Moreover, the same principles would apply to the withholding of income tax under Section 235 of the Income Tax Ordinance, 2001, which must also be calculated on the gross amount, independent of net metering, the report stated.
