Audit detects Rs13bn tax evasion by Pesco, Tesco

PESHAWAR: The Peshawar Electric Supply Company (Pesco) and Tribal Areas Electric Supply Company (Tesco) have received Rs13.4 billion from consumers on account of sales tax in year 2009-10, which they fail to show in their returns, reveal recently-conducted special audits.Audits of the Pesco and Tesco, supplying electricity in Khyber Pakhtunkhwa and tribal areas, were carried out for the first time by Inland Revenue Audit Unit of the Regional Tax Office, Peshawar, in April and May last year respectively.Consequently, assistant commissioner of the Inland Revenue last month ordered recovery of the amount from the two public utilities in addition to the penalties on account of default surcharge, officials told Dawn .Both the companies, however, have challenged the special audit on various grounds before the commissioner appeals of the RTO, seeking relief against these orders.Audit report of the Pesco, a copy of which is available with media, suggests that the public utility has not paid Rs3.127 billion sales tax on account of units it received and sold from May 2009 to May 2010. During this period, the company had received Rs10.705 billion units from the National Transmission and Dispatch Company (NTDC), an entity which sells power to the distribution companies.

However, the company had paid sales tax against 6.639 billion units, which rendered the input tax of Rs3.127 billion as inadmissible, said the audit, adding “this amount stands recoverable along with default surcharge.”The Pesco has also declared less sales tax returns compared with the annual accounts, which caused short payment of Rs4.031 billion on account of sales tax.According to the audit, the public utility had reported total sales of Rs53.478 billion in its annual account, while as per the sales tax returns it stood at Rs28.280 billion, which means sales tax up to Rs4.031 billion was not paid. The audit also pinpointed liabilities worth Rs2.042 billion against the Pesco payable to the tax office on accounts of different levies.When contacted for comments on the report, a Pesco spokesperson said that the public utility had filed an appeal against this order because it believed findings of the audit as “technically incorrect.”The official said that the Pesco was a public sector company, where no individual got any pecuniary gain in case of evasion of taxes and hence this was unlikely.“The Pesco files returns of sales tax payment against those units only which are sold to consumers,” said the spokesperson while citing the reply submitted to the RTO in response of the audit.

The Pesco is bearing about 36 per cent line losses in the process of transmission and dispatch, the spokesperson said and asked how it could pay tax against the units consumed in this process naturally.The special audit also found identical discrepancies in accounts of the Tesco, as the tax officials had ordered recovery of Rs4.33 billion from the utility as short payments against different taxes, an official explained.According to the audit, the Tesco had purchased 2.517 billion units from the NTDC between May 2009 and May 2010, but it charged sales tax against 1.823 billion units, rendering the input tax of Rs545.992 million as payable along with default surcharge.Similarly, the Tesco had also been accused of short payment of tax worth Rs3.788 billion against various taxable supplies during the audit period, which stands recoverable, said the orders of RTO.The Tesco, which caters to the electricity requirement of tribal areas, has also gone to the Commissioner Appeals of RTO Peshawar against the audit.A Tesco official, wishing not to be named, said that the company used to pay sales tax against billed units only, as the electricity consumed in the transmission and dispatch process was not chargeable.He said that the National Electric Power Regulatory Authority (Nepra) had allowed the Tesco 22.25 per cent line losses in 2009-10. However, actual line losses stood at 26.25 per cent due to the worst law and order situation in the Federally Administered Tribal Areas (Fata), he explained and added the public utility could not pay the taxes against these line losses – Dawan