Sindh govt, HIT embroiled in decade-old dispute over sales tax, duties

The Sindh Police had procured weapons and other products from the HIT, but the payment was never made

ISLAMABAD: The Sindh government has been embroiled in a dispute regarding the waiver of stamp duty and the sales tax on weapons and other defence-related products supplied to the Sindh Police by Heavy Industries Taxila (HIT).

The provincial government has approached the federal government for its legal opinion in order to resolve the dispute. According to a letter, penned by Sindh Home Secretary Abdul Kabeer Kazi, a copy of which is available with The Express Tribune, the dispute with Heavy Industries Taxila over the waiver of taxes dates back to October 2009. Back then, the Sindh Police had procured weapons and other defence-related products worth millions of rupees from the HIT. The payment was, however, never made to the HIT as both parties couldn't reach an agreement over the issue of sales tax and stamp duties.

Over the years, the provincial and federal authorities have conducted a number of meetings to resolve the issue, but to no avail.

Back and forth

In 2009, the HIT raised the issue regarding the waiver of stamp duty and three per cent sales tax on its weaponry supplies made to the Sindh government. The issue saw its first extensive review in a Public Accounts Committee (PAC) meeting held on May 14, 2019, the home department letter states, adding that as per the Audit DG for Sindh, the provincial government is not entitled to the said waivers.

On the other hand, HIT officials maintain that the federal law ministry's letter, 2010/68, issued on April 18, 2010, had clarified that stamp duty and sales taxes were not applicable for weaponry supplies meant for police and other law enforcement agencies (LEAs).

The matter was discussed extensively in the PAC meeting held on July 11 this year.

The meeting resolved that the matter will be referred to the Federal Board of Revenue (FBR). The provincial government, in its summary sent to the federal government, has presented details of all efforts taken for the resolution of the dispute including the position of the PAC panel, said sources, adding the home department has apprised the FBR of the situation while seeking its position on the issue in the form of a clarification letter.

The final decision on the matter will be taken in light of the FBR's response, sources said, adding that the tax collection agency, after presenting its position, may forward the matter again to the PAC for final approval.

Published in The Express Tribune, September 10^th, 2019.