The Federal Board of Revenue (FBR) has announced a significant 55% increase in tax collection derived from electricity bills for the month of March 2025. This substantial rise reflects a notable surge in energy consumption across the country, primarily driven by increased industrial and commercial activities.
According to sources within the FBR, the Large Taxpayers Office (LTO) Karachi recorded a tax collection of Rs2.14 billion from electricity bills in March 2025. This represents a considerable jump compared to the Rs1.38 billion collected during the corresponding month in the previous year. The FBR attributed this sharp upward trend to a marked increase in electricity usage across various sectors of the economy, fueled by expanding industrial production and extended commercial operations observed during the month of Ramadan.
FBR officials also pointed out that the earlier onset of summer in the region contributed to a higher overall demand for electricity. This was evidenced by increased usage of air-conditioning and refrigeration systems in both residential and commercial areas. Furthermore, the extended market hours typically associated with Ramadan also played a significant role in driving up electricity consumption, ultimately leading to greater tax inflows generated from power bills.
On a cumulative basis, the LTO Karachi has successfully collected Rs27 billion in taxes from electricity bills during the period spanning from July 2024 to March 2025. This represents a substantial increase from the Rs17.68 billion collected during the same nine-month period in the previous fiscal year, marking an impressive 53% year-on-year growth. While the FBR acknowledged that the prevailing high electricity prices in the country have undoubtedly contributed to these higher tax figures, the significant growth is also seen as a positive indicator of underlying economic momentum.
The FBR levies this tax under the provisions of Section 235 of the Income Tax Ordinance, 2001. This section mandates the collection of advance tax on electricity consumption by commercial, industrial, and specific categories of domestic users. The tax is directly applied and collected through monthly electricity bills, with the applicable tax rate varying based on the consumer category and their level of electricity consumption.
Under the regulations outlined in Section 235:
- Commercial consumers are subject to a 10% tax on their electricity bills falling within the range of Rs500 to Rs20,000. A higher tax rate is applied to bills exceeding the Rs20,000 threshold.
- Industrial consumers are charged a 5% tax on their electricity bills, particularly those considered to be large-scale consumers.
- Domestic consumers are granted an exemption from this tax if their monthly electricity bills remain below Rs25,000. However, if a domestic consumer’s bill exceeds this threshold, they are taxed at a rate of 7.5%.
The FBR also clarified that consumers who are actively listed on the Active Taxpayers List (ATL) may be eligible for certain exemptions or adjustments to this advance tax. Conversely, consumers not on the ATL may be subject to minimum tax rules or may be required to present specific exemption certificates to avoid potential instances of double taxation.
Following the government’s recent announcement of reductions in electricity tariffs, the FBR anticipates that the overall tax collected through electricity bills may normalize in the coming months. However, the strong performance observed in March 2025 reflects both robust electricity consumption across key sectors and a commendable level of tax compliance among consumers, both of which are considered crucial factors for sustaining the current revenue momentum.
