Govt decides to bring reforms in GST Act


Farhan Zaheer June 15, 2010

KARACHI: The government has decided to bring reforms in the General Sales Tax (GST) Act by withdrawing all exemptions and increasing the tax rate by one per cent. As a result, it will put the Value Added Tax (VAT) on the backburner for the time being, said Chairman of Revenue Advisory Council Dr Hafiz Pasha.

“I wonder how the industry will accept the increase in GST from 16 to 17 per cent by rejecting VAT,” he said, adding had VAT been implemented it would have been at the rate of 15 per cent on all sectors.

He was talking at a post-budget seminar organised by the Applied Economics Research Centre (AERC) on Monday.

“I am hopeful that the additional money coming under the NFC Award for provinces will ease their financial problems,” he said.

“I am convinced that the NFC Award is a very good step in the right direction. I am hopeful that this will help ease poverty in the provinces by providing basic facilities like health and education,” said Pasha.

“I have been saying that the federal government needs to transfer its powers to the provinces. Now, with the NFC Award, a lot depends on how the provinces tackle their problems,” added Pasha.

The government has succeeded in imposing capital gains tax. However, the tax system in Pakistan is still extremely unjust as the government has failed to tax the agriculture sector, panellists at the seminar said.

The government has not slapped Re1 tax on each cigarette filter in the budget. It was Re1 on one filter rod from which six cigarette filters are made, so the new tax on each cigarette filter is 16 per cent, Pasha said, adding that Finance Minister Abdul Hafeez Sheikh mistakenly uttered Re1 new tax on each cigarette filter in his budget speech.

Shahid Hafiz Kardar, former finance minister of Punjab while throwing light on the budget, said that economic management is the crucial problem and not budget.

“The basic problem of the governments in Pakistan is bad governance,” he said.

The government is not serious about freezing non-development expenditures, said Kardar, adding that one can see his huge team touring Europe and Rs12 billion bailout package for the Pakistan Steel Mills.

“The tax system in the country is highly unjust. The government is also not sincere about taxing agricultural income and is deliberately using delaying tactics,” he stressed.

With time, more and more institutions are being established by the provincial governments whose responsibilities are same like the federal institutions, which results in funds wastage. The Punjab government has increased the number of institutions to 38 from 22 in the last six years, Kardar said while citing an example.

The public sector development programme (PSDP) in budget 2010-11 is more realistic and matches the income generation unlike “what we saw in the last couple of years.” But at the same time, higher number of projects in the PSDP, results in higher percentage of corruption as political economy continues to prosper, he added.

M A Jabbar, who was representing the industry, said bureaucracy in Islamabad deliberately made changes in the NFC award implementation when they removed the clause in which it was written that provinces may collect GST.

He criticised the government for levying more taxes on the industry, saying the government should stop burdening the industry and broaden the tax net.

Published in the Express Tribune, June 15th, 2010.

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