Sales tax portal to launch this week
Haq also expressed concern at the immense level of double taxation in the system and called for major sales tax reforms. CREATIVE COMMONS
The Federal Board of Revenue (FBR) has planned to launch Pakistan’s single sales tax return filing portal on Tuesday (December 28) without developing a legally compliant and well-integrated system.
The launching of the online portal to ensure filing of one sales tax return instead of six is part of the World Bank’s conditions for the sake of a $400 million loan. India has done it four years ago. The FBR has planned inauguration for December 28 and also informed the provincial governments – who are the main stakeholders – about the launching ceremony, according to sources and official documents of the FBR. At present, six tax authorities are operating in the country and receiving sales tax returns separately.
These are the FBR, Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), Khyber-Pakhtunkhwa Revenue Authority (KPRA), Balochistan Revenue Authority (BRA) and Council Board of Revenue AJK (Azad Jammu and Kashmir). “The FBR intends to activate the single sales tax portal/ return for sales tax returns, while the prime minister has been requested to formally inaugurate the single sales tax portal, most probably on December 28, 2021,” according to the FBR’s meeting with the provinces on December 15.
However, sources told The Express Tribune that neither the provinces were ready to plug in to the system nor was there any portal developed that could effectively start operations by January 1, 2022. In its correspondence with the provinces, the FBR has claimed that the single sales tax portal has been prepared in pursuance of government’s desire to facilitate taxpayers, promote ease of doing business and reduce compliance costs. The tax collection department held several discussions and inked agreements with the provincial revenue authorities. Subsequently, on December 21, the FBR sent another letter to the provinces, asking them to nominate representatives for a committee for resolution of the issues arising out of Single Sales Tax Portal/ Return and harmonisation of the rules.
The launch of the portal without first developing a real one could cause embarrassment for the federal government, a provincial government representative said while speaking on condition of anonymity. The single tax portal is aimed at facilitating taxpayers to file single monthly sales tax return instead of multiple returns (six) on various portals, which will significantly reduce the time and cost of compliance. The portal would also be beneficial for tax collectors in having a 360-degree view of taxpayers’ business activities across the country in order to maximise revenue potential and tax compliance.
The single sales tax portal is extremely important for ease of doing business and resolution of interprovincial issues, said Punjab Revenue Authority Chairman Zainulabidin Sahi. But he said that the recommendation of provinces was that it should be launched in a phase-wise manner. The government is also seeking a $400 million loan from the World Bank under the Resilient Institutions for Sustainable Economy (RISE-II).
One of the conditions was that the federal and provincial finance departments should issue implementing regulations following the approval of common GST laws passed by the federal and provincial assemblies to generate a harmonised GST for goods and services across the country. Another condition is that the federal and provincial governments would adopt uniformed property valuation rates. Both these conditions remain unimplemented.
Disputes remain unresolved
The FBR has made a plan to launch the system despite serious issues hampering the integration. The sources said that the so-called new system was aligned only with FBR law as provincial laws have not yet been amended to allow such integration. The system can only determine tax payable based on origination, which is the viewpoint of Sindh point but the system is not capable to separate services where GST tax is being collected on the point of termination, the sources said.
There was also no system to determine who would assess and audit the returns filed on the single portal. Another unresolved issue is that provincial HS codes are different from the FBR, which would have made it difficult to integrate the laws. More importantly, there are different GST rates, as Sindh charges 13% GST on services, Punjab 15% and FBR 17%. The taxpayers are registered at multiple jurisdictions.
There is no clarity who will register and de-register them after launch of the new portal. The FBR’s portal is not able to auto calculate input and output tax adjustments among six tax authorities, said the sources. But Sahi said that no information technology (IT) based system is perfect at the time of launching and the issues arising during implementation can be solved with the passage of time. The Express Tribune had sent a set of questions to the FBR spokesman Asad Tahir three days ago but he did not reply.
He was asked to comment whether it was correct that the Prime Minister would launch the single sales tax portal on December 28 to enable taxpayers to file single monthly sales tax returns instead of multiple returns. Tahir was also requested to comment whether the four provincial revenue authorities were fully on board and is FBR system aligned with all provincial authorities’ laws, to determine input tax adjustments, output tax and final payment share of FBR and relevant province.
Another centre-province dispute
The federal and provincial governments have not been able to resolve the dispute over property taxation. Punjab province has opposed FBR determining its own valuation rates. Punjab has proposed that instead of adopting FBR valuation tables by the provincial government, the DC valuation tables, prepared in consultation with FBR, should be adopted by FBR, according to a communication between Punjab and federal government.
The Board of Revenue, Punjab is of a view that FBR should adopt the DC valuation tables as the same are notified according to the fresh surveys of the field officers in consultation with FBR and are more accurate. Further as per the rules ibid, DC valuation tables are notified once in a year and no second revision is allowed. The FBR had recently notified new property valuation rates but it had to suspend those after serious anomalies were pointed out by the realestate sector players.