KARACHI: A provincial traders’ body has approached the Sindh High Court (SHC) challenging the new sales tax imposed on retailers through electricity bills.

The Anjuman-i-Tajran Sindh argued that the authorities concerned must devise a proper mechanism before imposition of the sales tax as the same was ultra vires to the fundamental rights guaranteed in the Constitution.

Citing the federal finance secretary, Federal Board of Revenue, Federation of Pakistan Chambers of Commerce & Industry, Karachi Chamber of Commerce and Industry and K-Electric (KE) as respondents, the petitioner, through its president Jawaid Shams, submitted that the association represented retailers and small traders across the province.

The petitioner association submitted that it was impugning the legality of the new sales tax regime in line with the Finance Act, 2022 under which a minimum Rs3,000 sales tax was applicable to all the registered retailers (filers) and Rs6,000 to non-filers across the country through electricity bills on a monthly basis.

Question how a private entity like KE is assigned govt role; court will take up petition on Aug 4

The counsel for the petitioner argued that the sales tax on small traders had caused immense chaos among small businessmen as the new levy had no procedure or defined mechanism while definition of a retailer was also not defined anywhere.

He also submitted that as per the Finance Bill, 2022, the ministry of finance had revised the applicable sales tax on retailers with effect from July 1, and thus it would start collecting such a levy through all electricity bills from the current month.

The lawyer contended that no survey had been carried out for charging sales tax through power bills. The whole system would get jeopardised as it was very difficult to determine sales through consumption of electricity.

He submitted that the effectiveness of such a tax could harm several businesses since the process was not defined because if two or more electricity metres were installed at a shop, how would that shopkeeper pay tax on each bill.

The counsel also stated that the collection of tax via a utility bill had created chaos since a private entity had been assigned the role of a government institution while the KE had already been facing immense criticism and a huge backlog in supply of power.

He argued that earlier traders were taxed annually as per their turnover, which was a justifiable fact and no one raised any objection as it a provision for taking the traders in tax net.

The lawyer contented that an alternative was also discussed with the government during negotiations about fixed income tax on an annual basis as provision for the same was available in law, but it had been ignored.

He stated that impugned amendments in Section 3 (9) of the Sales Tax Act, 1990 was discriminatory in nature against the fundamental rights of the petitioners and pleaded to declare the collection of new sales tax through power bills unlawful and unconstitutional.

The petitioner also sought directives for the respondents to devise a proper mechanism before imposition of sales tax and a restraining order from imposing and collecting such tax till the final order on the petition.

A two-member bench of the SHC headed by Justice Salahuddin Panhwar took up the petition and after a preliminary hearing adjourned the matter till Aug 4.

Published in Dawn, August 1st, 2022