Provinces have no power to impose sales tax on CAA, says SC

Three-judge bench upholds SHC’s four-year old order

ISLAMABAD: A three-judge bench of the apex court has upheld the Sindh High Court’s four years old order wherein it had declared that the CAA was not entitled to pay sales tax to the Sindh government under the Sindh Sales Tax on Service Act 2011.

The bench, headed by Justice Mushir Alam and comprising Justice Qazi Faez Isa and Justice Sardar Tariq Masood, gave the verdict while hearing the petition filed by the Sindh government and Sindh Revenue Department.

Justice Qazi Faez Isa who authored the 47-page verdict observed that the Constitution is not to be interpreted narrowly or restrictively and advised such approaches should be avoided.



“While the provincial legislatures are independent, they must operate within the sphere allotted to them and within their prescribed limit. Neither the federation nor the provinces should invade upon the rights of the other nor encroach on the other’s legislative domain”, he observed.

The court observed that the CAA performs functions in the federal legislative list and is also a federal regulatory authority.

“The functions and regulatory duties performed by the CAA are within the exclusive sphere of the Federal Legislature and the appellants (Sindh government authorities) cannot impose sales tax on the purported services provided by the CAA”, read the judgment.



The verdict said that matters of common concern to the federating units are attended by the federal legislature and the federal government has the power to exercise executive authority in respect of all such matters itself or through an authority (like the CAA) in terms of Articles 97 and 98 of the Constitution.

“Amongst the objectives of the Eighteenth Amendment was to further strengthen the federation and institutions, therefore it cannot be interpreted to weaken the Federation and institutions like the CAA”, said the verdict.



Justice Isa observed that in a federal republic or federation matters of common concern to all the units are attended to by the republic or the federation.

“Airplanes fly over the airspace of Pakistan, land and take off from airports situated in different parts of the country. Since sales tax is ultimately borne by the users/people, therefore, if every province imposes sales tax it would make flying complex and unnecessarily expensive,” said the verdict.

It added that another adverse consequence would be to undermine the connectivity of the country. Airports situated in remote areas and in commercially unviable areas are subsidised; if such airports and the facilities they provide are subjected to sales tax these may become too expensive to use and resultantly the people will suffer.



The judgment further says that the CAA has been empowered by the federal legislature to levy and collect air route navigation charges and other taxes. It added that the fees and charges levied by the CAA are under the authority of the Federal Legislature, therefore, the province’s imposition of sales tax in effect constitutes taxing the fees and charges billed and recovered by the CAA. This cannot be permissible because it would mean that the province is taxing the constitutional means employed by the federal legislature to execute its constitutional powers. In doing so the province is also interfering in federal functions.