Bill passed: Sindh to collect GST on key services

Province collects Rs11.5b in six months, widens tax net.


Hafeez Tunio January 07, 2012

KARACHI:


In a bid to assert its financial autonomy, the Sindh government on Saturday passed a bill authorising itself to collect general sales tax (GST) on some key services, which had been a major source of dispute between the central and provincial governments.


Earlier, the central government had been collecting GST on all services but following the passage of 18th Constitutional Amendment, provinces were authorised to collect the tax. The central government still wants to do the job on behalf of the province, but Sindh refuses to give the go-ahead.

In an attempt to press the central government, Sindh Chief Minister Qaim Ali Shah even boycotted a meeting of the National Finance Commission to win the right of GST collection on services. However, other three provincial governments have authorised the FBR to collect GST on their behalf.

The Sindh Sales Tax on Services (Amendment) Bill 2011 authorises the provincial government to collect sales tax from banking and insurance companies, contractors of buildings, seaport and airport operators.

Services provided by insurance companies including reinsurance, financial leasing, commodity equipment leasing, hire purchase leasing as well as services rendered in respect of Modaraba and Musharika financing (Islamic banking) have also been included in the provincial tax net.

The bill, moved by Law Minister Muhammad Ayaz Soomro in the provincial assembly, further says that services provided by non-banking finance companies and other financial institutions, airport ground service providers, terminal operators and other services have been brought in the provincial tax net.

Briefing about the bill, the minister said the government had already established the Sindh Revenue Board for GST collection, modelled on the Federal Board of Revenue (FBR). He said the province had collected around Rs11.5 billion in the last six months at the rate of 16 per cent compared to Rs6 billion in tax provided by the central government to Sindh in the same period last year. Referring to the Constitution, he said the central government could only collect tax on goods while GST on services was a provincial subject.

Soomro said the Sindh government had not only collected the GST, but also registered around 3,300 taxpayers to widen the net. The GST target has been set at Rs22 billion this fiscal year ending June 2012.

Sindh Culture Minister Sassui Palejo, however, pointed out there were still many bottlenecks regarding bureaucracy in the central government, which should be removed.

Published in The Express Tribune, January 8th, 2012.

COMMENTS (2)

saleem | 12 years ago | Reply

The 18 amendment only says that GST on services is to be given to the provinces, there is no mention about who should collect it. Unfortunately for Sindh, the Council of Common Interest will vote against Sindh as the other three provinces want GST collected by FBR, as NFC matters are under CCI purview. Expect to see FBR collecting GST on services on behalf of all the provinces in the near future. Saleem Riaz ACCA, Birmingham Securities, UK

Hafiz Shah Ali | 12 years ago | Reply

Sindh Revenue Board consist of all retired officers. Sindh Revenue Bill has a provision that lists maximum age as 65 years.They have one member (legal) who is over 68 years old

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