REVENUE DIVISION

CENTRAL BOARD OF REVENUE

(Sales Tax Wing)

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C.No. 1(33)STR/99.Pt                                                                    Islamabad, the 24th January, 2000.

SALES TAX GENERAL ORDER NO. 01/2000

Subject:   VALUE OF SUPPLY IN RESPECT OF ELECTRICAL ENERGY BY IPPs INCLUDING HUBCO & KAPCO

                A question has arisen as to the value of supply of the electricity supplied by independent Power Projects (IPPs) to M/s. WAPDA and M/s. KESC. The contracts between M/s. WAPDA/KESC and different IPPs envisage a tariff structure comprising a number of categories e.g. the consideration of money on account of Energy Purchase Price (E.P.P.), Capacity Purchase Price (C.P.P.), Energy Purchase Price Premium, Excess Energy Bonus and Supplemental Charges (S.C.) etc.

            2. The EPP is payable by WAPDA/KESC on account of purchase of "electrical energy" while the consideration received by I.P.Ps on account of CPP is for net capacity of the plant which is to be paid during the contractual period. The payment of CPP, etc. is not reliable to the supply of electricity.

            3. The issue has been examined in the Central Board of Revenue and it is ruled that the value of supply of electricity by IPPs is the amount received on account or Energy Purchase Price only. Therefore, any amount in excess of EPP received on account of capacity Purchase Price, Energy Purchase Price Premium, Excess Bonus, Supplemental Charges etc. is not to be included in the value of supply as defined in clause (46) of section 2 of the Sales Tax Act, 1990. However, the assessment of sales tax is to be done in accordance with the provision of sections 7, 8 and all other relevant provisions of the Act, rules and notification. The IPPs will be entitled to claim full input tax adjustment against the sales tax paid on purchase of furnace oil and other tax-paid purchases for making supply of electricity subject to the provisions of section 8 and the notifications issued thereunder.

            4. This ruling applies only to IPPs including HUBCO and KAPCO, because of their peculiar arrangements with WAPDA/KESC and is not applicable to any other person, including Captive Power Projects, engaged in the production and supply of electricity.

(Zulfiqar A. Kazmi)