FTO Directs Uniform Tax Treatment on Net Metering

The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to institute a uniform policy framework governing the application of sales tax and withholding tax on electricity bills issued under net metering arrangements across Pakistan.

The directive was issued in the disposal of a complaint alleging discriminatory and inconsistent taxation practices. The complainant contended that K-Electric was levying taxes on the gross billed amount, whereas distribution companies (DISCOs) operating in other jurisdictions were reportedly adopting an alternate methodology, resulting in unequal treatment of similarly placed consumers.

The matter was reheard following remand by the President of Pakistan. All relevant stakeholders — including the FBR, K-Electric and various DISCOs — were afforded an opportunity to present submissions and clarify their respective positions.

In its observations, the Ombudsman noted that the proceedings did not involve adjudication of tax liability nor any encroachment upon the regulatory domain of the National Electric Power Regulatory Authority (Nepra). Rather, the core issue pertained to divergent implementation practices across different regions, giving rise to legal uncertainty and recurring grievances from consumers subject to comparable circumstances.

The FBR has accordingly been directed to address the issue at the policy and administrative level, in consultation with all stakeholders. The Board has further been instructed to issue clear guidance and ensure its consistent dissemination and enforcement by all field formations nationwide to eliminate discrepancies in practice.

The Ombudsman emphasised that the office is not determining tariff structures or regulatory policy, but has referred the matter for administrative resolution to safeguard uniformity, transparency and equitable tax treatment.