Tax nightmare of Pakistan’s electricity bills: 9 taxes, duties

August 29, 2023 (MLN): The government has been charging an overwhelming total of nine distinct taxes and duties on an average electricity bill.

This unwavering imposition of taxes has ignited debates regarding the financial burden placed upon the citizens, as electricity bills become increasingly burdensome due to these numerous levies.

The comprehensive breakdown of the various taxes and duties imposed on electricity bills as per the Ministry of Energy (power division) includes:

• Electricity Duty: A provincial levy ranging from 1% to 1.5% of variable charges, applicable to all consumers.
• General Sales Tax (GST): Levied under the Sale Tax Act 1990, imposing a 17% tax rate on the entire electricity bill for all consumers.
• PTV License Fee: An additional charge of Rs35/for domestic consumers and Rs60/for commercial consumers, is directly added to the electricity bills.
• Financing Cost Surcharge: Imposed at a rate of Rs0.43 per kWh, affecting all consumer categories except lifeline domestic consumers.
• Fuel Price Adjustment (FPA): A variable component reflecting the discrepancy between actual and reference fuel charges. Positive variations lead to extra charges on consumers' electricity bills, while negative variations result in a benefit to consumers.
• Extra Tax: Industrial and commercial consumers, not registered in the active taxpayer list of the Federal Board of Revenue (FBR), are subject to a tax rate of 5% to 17%, depending on different bill amount slabs.
• Further Tax: This additional tax of 3% is levied on all consumers without a Sales Tax Return Number (STRN), excluding domestic, agricultural, bulk consumers, and street light connections.
• Income Tax: Charged at varying rates based on applicable tariffs and the amount of the electricity bill.
• Sales Tax: Commercial consumers are taxed at a rate of 5% on bills up to Rs20,000/and 7.5% on bills exceeding Rs20,000/-.

The staggering number of taxes and duties has led to an alarming reality – Pakistan bears one of the highest levels of taxation on utility bills within the region.

This burden has contributed to substantial increases in electricity bills, often putting strain on the financial resources of ordinary citizens.

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