FBR to Charge Inactive Taxpayers with 4% Additional Tax

Karachi: According to a news report published on September 1, 2023, the Federal Board of Revenue (FBR) has decided to charge inactive taxpayers with 4% additional tax on electricity bills. The tax will be collected from individuals who are not a part of the ATL (Active Taxpayer List).

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Furthermore, FBR clarified that the recently updated Sales Tax Act for the fiscal year 2023-24 defines the scope of this taxation. Moreover, the 4% additional tax on electricity bills is described as part of the sales tax and is charged in addition to the existing 18% sales tax.

According to the FBR report, the sales tax rate of 18% is now applicable to:

(i) Taxable goods made by registered individuals as part of their taxable business operations

(ii) Imported goods into Pakistan, regardless of their intended use

The FBR further clarified that for those classified as non-active payers or when taxable supplies are made to individuals without registration numbers, an additional tax is charged at 4% on the supply’s value. However, this is in addition to the standard sales tax rate.

Moreover, the Federal Government can specify the categories of taxable supplies excluded from this additional tax.

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According to the Finance Act of 2023, effective July 1, 2023, the further tax rate increased from 3% to 4%. Implementing this higher tax rate on inactive taxpayers has resulted in higher electricity bills for individuals legally obliged to get sales tax registration. Furthermore, the public is already suffering from inflation and unprepared for another tax surge.

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