Sales Tax Instructions

Sales Tax Instructions, 2009
6. A question has arisen as to whether for the purposes of clearances made
under Chapter-X of the Central Excise Rules, 1944, the amount of central excise duty
remitted would also be included in the value of taxable supply or not.
7. Since, the amount of central excise duty is remitted under Chapter-X of
the Central Excise Rules, 1944, and is also not actually paid to the seller, the bond
submitted under rule 192 of the Central Excise Rules, 1944, cannot be considered as
―money‖ received by supplier.
8. Therefore, the amount of Central Excise Duty remitted under Chapter-X
of the Central Excise Rules, 1944, and accordingly not received by the supplier of the
taxable goods shall not form an ingredient of the value of taxable supply under section
2(46) of the Sales Tax Act, 1990.
(D)
VALUE OF SUPPLY IN RESPECT OF ELECTRICAL ENERGY BY IPPs
INCLUDING HUBCO & KAPCO.
9. 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.
10. The EPP is payable by WAPDA/KESC on account of purchase of
―electrical energy‖ while the consideration received by IPPs 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.
11. 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 of
Energy Purchase Price only. Therefore, any amount in excess of EPP received on account
of Capacity 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 section 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 notification issued thereunder.
12. 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.