FINDINGS/RECOMMENDATIONS DR. MUHAMMAD SHOAIB SUDDLE, (FEDERAL TAX OMBUDSMAN).---This complaint has been filed alleging maladministration for rejection of complainant's application for grant of exemption of Sales Tax on the supply of electricity under Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.
2. The complainant, a charitable hospital, requested the RTO Sialkot for grant of exemption on the supply of electricity under the provisions of exemption specified against Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990. After examining the request, the RTO Sialkot allowed exemption of Sales Tax on supply of electricity to the hospital. The complainant approached the Gujranwala Electric Power Company (GEPCO) for exemption of Sales Tax on supply of electricity on the basis of exemption certificate No. CIR-ENF/E-21/595 dated 31-8-2010 issued by the RTO Sialkot. The GEPCO authorities forwarded the case of the complainant to the F.B.R. For clarification. The F.B.R. clarified that exemption on the supply of goods to charitable hospitals under Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990, was conditional whereas exemption certificate issued by the RTO Sialkot was silent on that score. The F.B.R. Further clarified that such matters fell within the domain of F.B.R., to maintain a uniform policy across the country. The F.B.R. Therefore directed the RTO Sialkot to withdraw exemption certificate and forward the case to the F.B.R.
3. The complainant submitted fresh application to the F.B.R. Through RTO Sialkot. The case was examined by the F.B.R. And request for exemption regretted vide Letter No.1(8)STT/2002 dated 14-4- 2011 on the ground that no such exemption was available to any of the charitable hospitals.
4. Feeling aggrieved, the complainant filed complaint on the ground that F.B.R. Had illegally regretted the request, as exemption of Sales Tax on supply of goods to charitable hospitals of 50 beds or more was available under Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990.
5. The complaint was sent to the Secretary Revenue Division for comments in terms of section 10(4) of the FTO Ordinance, 2000. The Chief Commissioner, Regional Tax Office, Sialkot, in his comments stated that goods defined in subsection (12) of section 2 of the Sales Tax Act, 1990, included every kind of moveable property other than actionable claim, money, stocks, shares and security. As electricity was not included in the above definition, it could not be considered as goods for the purpose of exemption. The F.B.R. Therefore had rightly rejected the request of the complainant.
6. During the course of hearing, the AR contended that request of the complainant needed to be examined in the light of provisions of exemption specified at Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990. He submitted that electric energy was specified in the Pakistan Customs Tariff against heading 27.16 and prior to Finance Ordinance, 2000, it was exempt from Sales Tax under Sixth Schedule to the Sales Tax Act, 1990. Though this exemption of Sales Tax was withdrawn through the Finance Ordinance, 2000 (relevant Entry No.10 in the Sixth Schedule to the Sales Tax Act, 1990, was deleted), making the supply of electricity generally chargeable to Sales Tax at the standard rate, the subsequent addition of entry at Serial No.52-A of Sixth Schedule in 2008 exempted it for charitable .Hospitals of 50 beds or more . .
7. The DR submitted that the F.B.R. Vide letter C.No.3(125)ST/2011/ 104421 dated 16-7-2011 addressed to the Chief Commissioner, RTO, Sialkot, had clarified that though the exemption under Serial No.52-A of the Sixth. Schedule was available to equipment/ materials used solely for the purpose of hospital activities, C the said exemption was not available on utilities such as electricity and gas.
8. Both parties have been heard at length. The record produced has also been examined. The moot point is whether electricity is excluded from the definition of "goods". Section 2(12) of Sales Tax Act, 1990, defines "goods" to include every kind of movable property other than actionable claims, money, stocks, shares and securities. The Sales of Goods Act, 1930, defines "goods" to mean every kind of moveable property, other than actionable claims and money, and includes electricity, water; gas, stocks and shares, growing crops, grass and things attached to, or forming part of the land. More importantly, however, goods exempt from the levy of sales tax are covered under the Sixth Schedule of Sales Tax Act, read with reference to 1st Schedule to the Customs Act, 1969 (Pakistan Customs Tariff: Heading 27.16), It is thus obvious that electricity falls under the definition of goods, and supply of electricity to charitable hospitals of 50 beds or more is exempt from the levy of sales tax (Entry No.52-A of the Sixth Schedule to the Sales Tax Act, 1990).
Findings:--
9. In view of above stated position, the rejection of the complainant's application for grant of exemption of Sales Tax on supply of goods, including electricity, being based on unreasonable grounds is tantamount to maladministration in terms of section 2(3) of the FTO Ordinance, 2000.
Recommendations:
10. F.B.R to-
(i) allow exemption of Sales Tax on supply of goods, including electricity, to charitable hospitals of 50 beds or more, as provided in entry at Serial No.52-A of the Sixth Schedule to the Sales Tax Act, 1990; and report compliance within 30 days. C .