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GST on power deferred again

TAHIR DHINDSA

ISLAMABAD: The government on Thursday, once again deferred the imposition of General Sales Tax (GST) on electricity due to be levied on January 15.

"The GST is a provincial subject and only elected assemblies of the four provinces can impose it," legal experts told Finance Minister on Wednesday.

Sources told Business Recorder that it would now take at least a couple of months in developing legal infrastructure for the move.

The imposition was delayed due to legal lacuna brought to the notice of the federal government by Wapda, according to which imposition of GST was a provincial subject and the federal government could not directly collect the tax.

According to the constitution, imposition of the GST does not fall into concurrent list shared between federation and the provinces.

The matter has been referred to the law ministry for advice. The ministry would work out an alternative course of action for the period during which the constitution is in suspension.

The government was in a hurry to impose the GST on electricity as a conditionality of the International Monetary Fund (IMF) for $ 1.6 billion Enhanced Structural Adjustment Facility (ESAF) loan. Therefore, the government was keen to impose the tax before the forthcoming visit of the IMF team expected late this month.

The team will negotiate the disbursement of next two tranches of loan of $280 and $240 million. To avoid its political repercussions, the government adjusted GST against the fuel surcharge so that the overall price should remain the same.

Earlier, Wapda was unwilling to pay the tax because of its own frail financial condition. With overdraft of more than Rs 100 billion it refused to pay the tax to the federal government, which it had been collecting as fuel surcharge.

The government wants to impose GST on electricity, which is a part of the strategic plan of 1993, adopted by the government with an aim of privatising the power sector.

To attract private investment Wapda was divided into 13 companies: nine distribution companies, three generation companies and a transmission company known as National Transmission and Distribution Company (NTDC).

The government has so far been successful in privatising only Kot Adu Power Station.

Ministry of Finance now wants to go ahead with the plan. Solving the issue of GST tops the agenda.