20000214

Purchase of fuel oil, GST paid

CBR allows IPPs to

claim full input tax

adjustment

ASHRAF KHAN

KARACHI: The Central Board of Revenue (CBR) has given its ruling with regard to GST entitling all the independent power projects (IPPs) to claim full input tax adjustment against the GST paid on purchase of fuel oil and other inputs.

The decision will be applicable to Hub Power as well as Kot Addu Power companies.

Complications arose after the government implemented 15 percent GST on fuel oil, a major input of IPPs which they purchase from the state-run Pakistan State Oil (PSO). As the GST amount was passed on to the two power utilities, several anomalous factors had to be faced by them, sources said. With the CBR decision, the prevailing confusion would be removed, they said.

Inter alia, a question had arisen about the value of the electricity supplied by the IPPs to Wapda and KESC.

The CBR examined the issue, they said, and it ruled that the value of supply of electricity by IPPs is the amount received on account of energy purchase price (EPP) only. Therefore, any amount in excess of EPP received on account of capacity price purchase (CPP), energy purchase price premium (EPPP), excess energy bonus (EEB) and supplementary charges (SC) would not be included in the value of supply as defined in the relevant clauses of the Sales Tax Act, they said.

Nevertheless, the assessment of sales tax will be done in accordance with the provision of sections 7 and 8 and all other relevant provisions of the Act, rules and notifications. Thus, sources said, all the IPPs will be allowed to claim full input tax adjustment against the sales tax paid on purchase of furnace oil and other tax-paid purchases for making supply of electricity subject to the provisions of section 8 and the notification issued under that section.

Sources, however, clarified that this ruling was applicable only to IPPs only, and captive power plants or any other agency would be excluded from this decision.