Sindh refuses to exempt CAA bonds from stamp duty

The Sindh government has refused to exempt Islamic bonds worth Rs30 billion of Rs1 billion stamp duty.


Irshad Ansari June 23, 2010

The Sindh government has refused to exempt Islamic bonds worth Rs30 billion of Rs1 billion stamp duty. The bonds were to be issued by the Civil Aviation Authority (CAA) against its assets at the Quaid-e-Azam International Airport.

The floating of bonds has been delayed as without a no-objection certificate (NOC) from the Sindh government, the law ministry is reluctant to give its permission.

For the issue, the CAA had transferred 22 acres of the 3,000 acres of airport land to the Pakistan Domestic Sukuk Company.

Officials said that the Sindh government denied the duty exemption because it will reduce provincial revenues while the federal government’s stance is that the proceeds from the sale of Sukuk (Islamic bonds) will be spent on development so the stamp duty should not be levied.

Earlier, the Ministry of Defence had given the go-ahead to the bond issue and matters had been finalised with the Sindh government. The Sindh Revenue Board in talks with the federal government had also assured it that the bonds would be exempted from the stamp duty.

In this regard, a summary was also forwarded to the Sindh Chief Minister Syed Qaim Ali Shah. However, the Sindh government has so far not given any response to that.

The Sindh government is of the view that after the 18th Constitutional Amendment, provinces have been given financial autonomy and if the Centre does not allow the province to collect its duties and taxes then how the province will meet its expenditures.

According to the finance ministry, the State Bank of Pakistan (SBP) had to issue Sukuk bonds of one to three years maturity worth up to Rs30 billion on June 22 in line with the federal government’s plan to utilise its proceeds for budget financing.

The budget deficit is expected to increase to 5.3 per cent of gross domestic product compared to estimates of 5.1 per cent by the end of the current fiscal on June 30.

The deficit rose after the Friends of Democratic Pakistan forum failed to release pledged funds and revenue collection fell short of the target of Rs1,380 billion. To bridge the gap the government resorted to heavy borrowing from banks and slashed its development expenditures by around 40 per cent to Rs300 billion.

Published in The Express Tribune, June 24th, 2010.

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