Double taxation: Court gives stay order against FED collection

Order passed in response to petition filed by stockbrokers.


Our Correspondent August 01, 2015
PHOTO: EXPRESS

KARACHI: The Sindh High Court (SHC) has passed a stay order against the collection of federal excise duty (FED) from stockbrokers, a spokesman for the Karachi Stock Brokers’ Association said on Friday.

The SHC granted the stay order after the counsel for the Karachi Stock Brokers’ Association as well as 73 petitioners argued that the collection of FED from stockbrokers is ‘unlawful’ and constitutes ‘double taxation’.

“After the passing of the 18th Amendment, the sales tax on services is being collected by the Sindh Revenue Board (SRB) from all stockbrokers, who are paying this tax since July 1, 2011,” a statement from the stockbrokers’ association said.

The SHC has restrained the tax authorities from initiating any coercive action against the stockbrokers, it said, adding notices have been issued to the deputy attorney general, the Federal Board of Revenue (FBR), the SRB and officials concerned of the Inland Revenue department.

The stockbrokers association has been raising this issue since the start of 2015-16 when the FBR started sending show-cause notices/orders to members of the KSE, asking them to cough up money and pay excise duty.

However, tax collection on services, which were originally subject to the FED, was transferred to the provincial authorities with effect from July 1, 2011, after the passage of the 18th Amendment. In fact, the FBR had issued a notification to that effect, saying the FED stood withdrawn in order to avoid double taxation, the association previously claimed in the media.

The association said its members have regularly been paying sales tax on services to the SRB since July 1, 2011. While the FBR stopped
collecting this ‘illegal levy’ after June 30, 2011, the association claimed that the federal authority was once again bent on recovering the FED from Karachi-based brokerages.

“This is tantamount to double taxation and in total violation of the Constitution of Pakistan,” it claimed, adding it appeared to be a well-thought-out policy of the federal government, particularly the FBR, to target and harass the taxpayers of Sindh.

It also stated that the SRB, which is the provincial counterpart of the FBR, fully supports the KSE members’ stand with respect to the collection of FED.

Published in The Express Tribune, August 1st, 2015.

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