According to sources, the World Bank has linked the release of $400 million of the RISE-II program to resolving a dispute on GST collection between the Federal Board of Revenue (FBR) and Distribution Companies (Discos).
• Pending refunds on subsidies delay RISE-II program release
• FBR and Discos dispute affects World Bank funding for Pakistan
• FBR clarifies subsidy tax demand and refundability
• Resolution reached on subsidy refund issue with Discos
• Technical team to visit WAPDA House for digital sharing of data
The Finance Division (External Finance Wing) has noted that prior action 4b of RISE-II is pending due to a lack of consensus on the number of refunds made on subsidies. The FBR has shared refunds of Rs 6 billion against claims of Rs 10 billion.
The outcome of negotiations between the FBR and Power Division has yet to be shared with the World Bank, leading to an embarrassing situation for the government as the World Bank only released $400 million once the document was shared.
According to the FBR, a tax demand of Rs 232.136 billion was generated during tax procedures against various Discos because of subsidies supplied by the Central Government.
Moreover, a sum of almost Rs: 6 billion was seized. Finance Act 2022, however, made it clear that federal government subsidies are not included in the value of a product. The recovered amount became refundable as a result of its retroactive application.
During the most recent meeting, the Discos settled the matter, which Tariq Bajwa, SAPM on Finance and Revenue, presided over. It was decided that reimbursements calculated using subsidies of about Rs 3 billion rather than Rs 10 billion would be provided in stages by June 30, 2023, with refund payments beginning in January 2023.
The FBR accepted the ruling and guaranteed that, after revising the amount under Regulation 24 if necessary, the due amount of refunds would be paid to the appropriate Discos in phases.
The FBR also proposed necessary improvements in wording in Sales Tax Special Procedures for collecting and paying Sales Tax by Discos.
A technical team comprising officers of FBR and PRAL is being constituted. It shall be communicated to Power Division in due course for a visit to WAPDA House, Lahore, to share ST&FE Return data of DISCOs digitally.
The Power Division has been requested to nominate its technical team with contact details, communicate the date and time, etc.
K-Electric may coordinate and negotiate similar agreements for sharing digital data to coordinate and consistently operationalize the intended digitalization.