Karachi, February 25, 2025 – The Federal Tax Ombudsman (FTO) has identified a staggering annual revenue loss of Rs 9.38 billion to the Federal Board of Revenue (FBR) due to discrepancies in the collection of electricity tax across the country. This discovery has prompted urgent directives for corrective action to ensure tax compliance by power distribution companies. The FTO’s findings emerged during an investigation into complaints against K-Electric, which highlighted inconsistencies in the implementation of FBR’s tax directives. While K-Electric adhered to the taxation guidelines, the report revealed that other electricity distribution companies failed to implement the required tax collection measures effectively. Following its investigation, the FTO issued an order directing that all power distribution companies must charge an 18% sales tax on taxable electricity supplies, including those under solar net metering. The report emphasized that sales tax must be levied on the gross value of electricity supplied, rather than the net metering adjustments applied to consumer bills. The FBR has also reiterated that withholding tax under Section 235 of the Income Tax Ordinance, 2001, must be collected on the full electricity bill amount, without deductions based on net metering offsets. In response, the FTO instructed power distribution companies and FBR’s regional field offices to immediately implement these taxation guidelines to prevent further revenue losses. The FTO further clarified that the National Electric Power Regulatory Authority (NEPRA) does not have jurisdiction over taxation matters. Any previous regulatory guidelines or SROs issued by NEPRA or the Alternative Energy Development Board (AEDB) cannot override the provisions of the Sales Tax Act, 1990, or the Income Tax Ordinance, 2001. The FTO emphasized that the Supreme Court of Pakistan has already ruled on the supremacy of fiscal laws over regulatory directives. As per the…