SMEs urge govt to exempt solar power from sales tax

KARACHI: The Union of Small and Medium Enterprises (UNISAME) has called on the Small and Medium Enterprises Development Authority (SMEDA) to urge Prime Minister Shehbaz Sharif to review a recent ruling by the Federal Tax Ombudsman (FTO) regarding sales tax on electricity supply, especially solar power.

The ruling mandates an 18 per cent sales tax on power distribution companies without adjusting for net metering, citing revenue losses.

UNISAME President Zulfikar Thaver in a statement on Tuesday argued that entrepreneurs investing in solar systems deposit surplus electricity into the grid during the day and reclaim it later, making it an entrustment (‘Amanat’) rather than a commercial sale. Thaver criticised the double standard where grid companies buy solar electricity at lower rates but sell it back at higher rates, effectively turning the process into a commercial transaction. He emphasised that sales tax is meant to curb luxury consumption, not essential utilities.

With Pakistan facing an energy crisis, UNISAME insists that promoting solar energy is vital. They urge policymakers to fully exempt electricity from sales tax to encourage renewable energy adoption and support SMEs investing in sustainable power solutions.