FBR allows Wapda/MoF to make direct payments to PSO – Alfalah Securities Limited

Karachi: In order to resolve the circular debt issue in the power sector, the Federal Board of Revenue (FBR) has allowed Wapda or Ministry to Finance (MoF) to directly make payments to Pakistan State Oil (PSO) on behalf of power producers by relaxing the conditions under section 73 of the Sales Tax Act 1990, which required a proof of banking transactions from the bank account of buyer (power producers) to the bank account of supplier (PSO).

According to Alfalah Securities Limited, the FBR has issued a special order for compliance under section 7(3) of the Sales Tax Act 1990 which states that the direct payment by Wapda/MoF to PSO does not fulfil the conditions of section 73 of the Sales Tax Act 1990 and consequently Wapda and power producers both cannot claim input tax against the made payment. Resultantly, the FBR has directed RTOs/LTUs under the special order, after being satisfied that there would be no revenue loss or tax evasion, to allow Wapda and power producers to seek input tax adjustment against payments made to PSO. The input tax adjustment would be determined through the audit of accounts of PSO, Wapda and power producers which would determine the authenticity of the transactions and the actual payment made.