SHC voids tax amendments of Finance Act 2017

Declares Section 3 and 4-C of the sale tax act unconstitutional

KARACHI:

The Sindh High Court (SHC) has nullified the sales tax amendments of the Finance Act 2017, declaring Sections 3 and 4-C of the Sale Tax Act unconstitutional.

The SHC unveiled its order on a number petitions that claimed that only the federal cabinet could decide about the sales tax and this authority could not be delegated to an individual.

They said the federal cabinet had delegated the power to decide sales tax to an in-charge minister as it apparently did not want to take responsibility for these decisions.

The petitioners contended that under the law administrative authority could be delegated but the parliament’s authority could not be delegated. The petitions were filed by more than 25 businesses.

In order to short-circuit the Supreme Court’s historic judgment on the definition of “federal government”, the last PML-N government had proposed delegating to the finance minister the federal cabinet’s powers to exempt and change the scope of taxes.

The government had proposed changes in the Sales Tax Act of 1990, the Customs Act 1969 and the Federal Excise Duty Act to empower the Federal Board of Revenue (FBR) to make changes in these laws with the approval of the finance minister.

In view of the amendments, the finance minister and the FBR enjoyed vast powers – something that the apex court had not even allowed the prime minister to exercise.

After the apex court’s judgment of August 2016, the existing legal and regulatory procedures could not be changed without the prior approval of the federal cabinet.

In the light of the 18th amendment to the Constitution, the court defined “federal government” as the federal cabinet including the prime minister. After the SC order, the federal government had to take every case to the federal cabinet for approval, although it was not strictly following the court verdict.

The apex court’s landmark judgment that stopped the prime minister from unilaterally taking decisions on fiscal matters was aimed at restoring the constitutional structure of the trichotomy of power that the government had severely compromised.

The Constitution assigns the Supreme Court the responsibility of ensuring harmony and balance among the three pillars of the state – legislature, executive and judiciary. The federal government had filed a review petition against the Supreme Court’s verdict which the top court had turned down.

“The 18th constitutional amendment that changed the definition of federal government was in hindsight a mistake and I have discussed this issue with parliamentarians to correct the situation,” former finance minister Ishaq Dar had said while addressing a post-budget press conference.

 “As a result of the 18th amendment, the country went from one extreme to another,” he had claimed.