Electricity sector to impose eVAT next month

Electricity generation, transmission and distribution companies are now allowed to impose the Expanded Value Added Tax or eVAT after the Energy Regulatory Commission adopted a resolution implementing the new tax measure in the electricity sector.

The ERC, however, said these companies could only start collecting higher rates next month because transactions made before October 31 but due for collection after November 1 and billed by end of November are still considered to be VAT zero-rated.

These transactions include electricity sold, transmitted, and distributed, deferred charges such as Generation Rate Adjustment Mechanism or GRAM, and Incremental Currency Exchange Rate Adjustment or ICERA.

The ERC said that the deferred charges, the generation rate and the foreign exchange adjustments to electricity sold on or before October 31 must be submitted to the BIR by the end of this month even if they are billed and collected thereafter.

The commission said these companies are allowed to impose the eVAT on electricity sales consistent with Revenue Memorandum Circular No. 61-2005 issued by the Bureau of Internal Revenue.

"The electricity consumers are rest assured that the ERC has done an extensive review on the implementation measures of the eVAT affecting the electricity sector. Consumer protection is a paramount concern of the ERC," said ERC chairman Rodolfo Albano, Jr.

In a press statement, Albano also clarified that the impact of the implementation of eVAT, otherwise known as the Reformed Value Added Tax, would be less because power players would be collecting less than eight percent as result of the removal of the two percent franchise tax.

Republic Act 9337, or the eVAT imposes 10 percent tax on the generation, transmission and distribution of power. The law also gives President Arroyo the standby authority to raise the tariff from 10 percent to 12 percent by next year.

ERC said that eVAT, which took effect last November 1, will be based on the Gross Receipts on sales and services of electricity by generation, transmission, and distribution companies.

For VAT purposes, the commission explained that the gross receipts, which is reduced by discount and increased by penalties, should be reduced further by the Energy Tax under Batas Pambansa 36, benefits to host communities, security deposit on metering machines and the universal charges imposed under the Electric Power Industry Reform Act.

ERC also emphasized that sale of power or fuel generated through renewable sources of energy and sale of electricity to enterprises registered with the Philippine Economic zones are non-taxable.

The commission said that the tax collected by the distribution utilities on generation, transmission, and system loss shall be remitted to the concerned generation and transmission companies that will be responsible for the tax due to the BIR.

"The ERC would like to emphasize that the electricity providers will not earn out of the VAT transactions. This is a pass through charge that is revenue-neutral. The ERC will perform confirmatory process on VAT imposed by the Generation, Transmission, and Distribution Utilities" Albano stressed. - Wenna A. Berondo