Retailers in ruckus on fixed sales tax

KARACHI: The retailers are in limbo as the notification to reverse the fixed sales tax has encountered delays resulting in power distribution companies charging it in their bills to retailers, a statement said on Saturday.

Following the implementation of the fixed retailers’ tax introduced in the Finance Act 2022, unrest was observed all around the country.

The retailers staged several protests in different parts of the country, after which Finance Minister Miftah Ismail assured shopkeepers and small retailers of removing all taxes being collected through electricity bills.

However, no such notification has been issued till yet by the finance ministry, and as a result, the power distribution companies continue to charge it in their bills to the retailers.

In the absence of this notification, approximately 1.5 million retailers are boycotting to pay their electricity bills which is resulting in the growth of circular debt by about Rs1.4 billion every day. It is estimated that so far Rs20 billion has already been added to the circular debt, specifically because of this ongoing issue.

Per the Finance Act 2022, effective July 1, the federal government introduced fixed slabs to increase tax collection from retailers.

While retailers were previously charged on a percentage basis linked to their consumption, three slabs were introduced through this recent revision with a minimum tax liability of Rs3,000 even if the energy consumption by the commercial consumers stood at 0 units.

In addition, the tax amount was double in case the retailers’ name was not appearing in the Federal Board Revenue’s (FBR) Active Taxpayer List (ATL).

A widespread public outcry from retailers across Pakistan, demonstrations, and social media backlash resulted in the Finance Minister Miftah Ismail issuing multiple statements about the reversal of this Sales Tax.

Per his Twitter statement, initially, the tax was supposed to be withdrawn for users with power consumption below 150. However, his subsequent statement reversed this for all retailers for one year.