more vat system
| |

No more VAT on system loss in electricity bills starting October

MANILA, Philippines – Your electric bill this October will likely be slightly less now that you no longer have to pay value-added tax (VAT) on the allowable system loss charge starting this billing cycle forward.

Following new rules from the Energy Regulatory Commission (ERC) that put the tax exemption into effect and change how the charge appears on electricity bills, a Meralco spokesperson confirmed to Rappler that “the VAT removal on system loss will be effective this October billing.” 

This means customers should begin seeing the VAT reduction in their October bills, although they will continue paying the underlying system loss charge itself. (READ: Meralco rates dip slightly in September despite higher generation costs)

The change, however, addresses only the tax imposed on system loss, not the system loss charge itself. System loss refers to electricity lost before it reaches paying customers. Some are non-technical, which arise from electricity theft, illegal connections and faulty metering, while technical losses occur as a natural consequence of electricity passing through power lines.

Must Watch

How much could you save if system loss charges are removed from your Meralco bill?


How much could you save if system loss charges are removed from your Meralco bill?

Removing the underlying system loss charge will take considerably longer. The government has proposed phasing out recoverable non-technical losses, but the National Electrification Administration (NEA) has warned that removing this immediately would push many electric cooperatives into losses without first giving them financial support for equipment updates. The government estimates around P7.5 billion would be needed for a four-stage program to eliminate non-technical system loss. (READ: NEA seeks extra P7 billion to eliminate non-technical system losses)

Technical losses pose an even longer-term problem since they cannot be completely eliminated. The Department of Energy (DOE), ERC, NEA, and electric cooperatives are still in the process of making plans to determine what improvements are needed to lower them, such as upgrades to lines, substations, and other infrastructure. The government has targeted completion of this plan in 2027, meaning the system loss charge itself is unlikely to disappear from consumers’ bills anytime soon even as the VAT on it is removed. 

Tighter rules on ‘other charges’

The ERC separately issued another resolution standardizing the “Other Charges” that utilities may collect. These may generally be imposed only for specific customer-requested or account-related services, such as certain connection, disconnection, and reconnection activities. 

The rules are intended to prevent double charging. Expenses already recovered through distribution, supply, and metering rates cannot be collected again under Other Charges. Utilities may recover only incremental costs such as direct labor, deployment and fuel, and replacement materials. Administrative and overhead expenses cannot be separately passed on to consumers. 

The ERC also capped late payment fees at 2% of the current month’s bill or the unpaid portion, whichever is lower. The fee may be imposed only once per bill and must be separately shown on the next billing statement. – Rappler.com

Must Read

[READOUT] The race to deliver cheaper power


[READOUT] The race to deliver cheaper power

Similar Posts

  • | | | |

    Leandro Leviste sells another P3 billion in SPNEC shares as solar controversies mount

    The sale comes as Leviste faces plunder and graft complaints before the Ombudsman alongside his mother, Senator Loren Legarda, and former energy secretary Alfonso Cusi over roughly P10 billion in solar projects

  • | | | |

    Petrol down to Rs336.03, diesel to Rs392.38

    The federal government has announced a slight reduction in the prices of petrol and high-speed diesel for the next fortnight. According to a notification issued by the Petroleum Division, the price of high-speed diesel has been reduced by Rs0.66 per litre. Following the latest revision, the new price of diesel has been fixed at Rs392.38 per litre. The government has also lowered the price of petrol by Rs0.12 per litre. After the reduction, the new retail price of petrol now stands at Rs336.03 per litre. The revised fuel prices came into effect after the issuance of the official notification by the Petroleum Division. Petrol is widely used by private vehicles, motorcycles and small transport operators across the country, while high-speed diesel is mainly consumed by heavy transport, agricultural machinery and industrial sectors. Any change in fuel prices directly affects transportation costs, production expenses and the overall cost of living. Although the latest reduction is modest, it provides some relief to consumers and businesses that rely on petroleum products for their daily operations. The government reviews petroleum prices periodically, taking into account fluctuations in international oil markets, exchange rate movements and applicable taxes and levies before announcing revised rates. The latest adjustment reflects the government’s routine fuel price review mechanism.

  • |

    IMF-backed move to End EPZ local sales Quota sparks concerns over textile recycling, jobs

    KARACHI: A proposed move to withdraw the permission allowing factories operating in Pakistan’s Export Processing Zones (EPZs) to sell up to 20% of their output in the domestic market has triggered concerns among exporters, investors and international textile-recycling organisations, who fear the policy could disrupt investment, employment and a wider global circular-economy supply chain. The controversy has emerged after Pakistan committed to the International Monetary Fund (IMF) that it would amend the existing rules governing EPZs and prohibit sales from these zones into the domestic tariff area. According to the IMF’s latest programme review, Pakistan has committed to introduce amendments aimed at ending domestic sales by EPZ-based manufacturers. The report states that the amendments were to be placed before the federal cabinet for approval by September 2026. However, exporters and industry representatives have challenged the move, arguing that the existing 80:20 arrangement was part of the investment and regulatory framework under which many businesses established operations in the zones. Under the existing system, EPZ manufacturers can export 80% of their production while selling up to 20% in Pakistan after payment of applicable duties and taxes. Industry stakeholders say the domestic-sale provision is particularly important for products that have limited commercial demand in overseas markets. The proposed abolition has also attracted attention in the United States because American companies supply raw materials and used textiles to Pakistani businesses operating in the EPZs. The US-based Secondary Materials and Recycled Textiles Association (SMART) has approached IMF Mission Chief to Pakistan Iva Petrova, warning that eliminating the domestic-sales provision could have consequences extending beyond Pakistan’s industrial sector. The association has argued that Pakistan occupies an important position in the global textile circular economy, particularly in the sorting, grading, reuse and recycling of used textiles collected in North America and Europe. According to SMART, used clothing and textile materials collected in the United States, Canada and European countries are sent to Pakistan, where they are sorted and graded before being channelled into reuse, recycling, manufacturing and affordable consumer markets. The association has warned that ending the 80:20 mechanism could reduce demand for recovered textiles and place downward pressure on their prices. Such a development, it said, could weaken textile-collection programmes in North America and reduce the income generated by charitable organisations from donated clothing. Organisations including Goodwill, the Salvation Army and St Vincent de Paul depend partly on revenues generated from donated goods to finance a range of social programmes, including workforce training, employment assistance, food support, recovery services, youth programmes and housing assistance. SMART has therefore cautioned that a major disruption in Pakistan’s used-textile market could have financial consequences for charitable organisations in North America, with potential losses running into tens of millions of dollars. The association also warned that reduced demand for used textiles could ultimately result in a greater volume of reusable material being sent to landfills or incinerators rather than being recycled or reused. US exporters raise objections US exporters have also expressed concern over the proposed withdrawal of the 20% domestic-sale allowance. Their concerns are significant because American suppliers form part of the upstream supply chain that feeds Pakistani recycling and manufacturing units located in EPZs. Abid Iqbal, representing Nashmia Industries, said during Express News programme The Review that US exporters had communicated their concerns to Pakistani counterparts. According to Iqbal, US exporters had also been told informally that the IMF itself had not initiated the proposal to remove the 20% quota. The development has consequently raised questions within the industry about how the condition was incorporated into Pakistan’s commitments under the IMF programme and whether sufficient consultation took place with affected stakeholders. Industry representatives have also warned of possible legal and contractual disputes, maintaining that the 20% domestic-sales provision was part of the regulatory and investment framework under which businesses made their investment decisions. They argue that companies entered the zones with an understanding that they would be able to export the bulk of their production while disposing of a limited portion in the domestic market after meeting applicable tax and customs obligations. EPZ rules and proposed amendment The Export Processing Zones Authority (EPZA) operates under the legal framework established through the EPZ Act of 1980. The law enables the establishment of export processing zones with approval from the federal government. Under Rule 228(5) of the Customs Rules, EPZ-based factories have historically been allowed to sell up to 20% of their production in the domestic tariff area, subject to applicable duties and taxes. A higher limit of 30% had been applicable to the Resalpur area. EPZA has reportedly forwarded a proposal to the Federal Board of Revenue (FBR) to eliminate the 20% quota from October 1 in line with the IMF-related commitment. The proposal, however, has exposed differences within the government over the scope and interpretation of the IMF condition. Proceedings of the Senate Standing Committee on Industries held last month indicate that the Ministry of Industries and Production maintained that abolition of the 20% domestic-sales quota was not included in the original IMF agreement. According to the ministry’s position, the initial IMF requirement was restricted to preventing the introduction of new fiscal incentives, including tax concessions and subsidies, rather than immediately eliminating the existing domestic-sales mechanism. The ministry has reportedly argued that the later addition of the quota-related condition requires further clarification. Assessment of EPZs The issue is also linked to an assessment of Special Economic Zones (SEZs) and EPZs that Pakistan was required to undertake under the IMF programme. The government engaged consultancy firm AT Kearney to assess the zones and determine whether their operations were creating distortions in the domestic market. According to records presented before the Senate Standing Committee on Industries, the assessment completed last year concluded that EPZs were not creating significant market distortions. The report, according to the parliamentary proceedings, did not recommend withdrawing existing fiscal incentives. The issue has therefore become a point of discussion between government officials and the IMF as authorities seek to reconcile the lender’s programme requirements with

Leave a Reply

Your email address will not be published. Required fields are marked *