Sales tax on services: Government takes back decision, FBR to collect

Kaiser Bengali hits out at decision, says it is against the policy of provincial autonomy.

KARACHI:

In an apparent reversal of its promise to promote provincial autonomy, the federal government has backtracked from its decision to handover to the Sindh government the right to collect GST on services as agreed in seventh National Finance Commission (NFC) Accord.

According to Dr Kaiser Bengali, member NFC (Sindh) the agenda of the meeting on the 8th NFC Award (which has been constituted) it was proposed that collection of GST on services be assigned to the Federal Board of Revenue (FBR) instead of the Sindh Revenue Board (SRB).

Addressing a press conference on Wednesday at the Karachi Press Club Bengali, said that the details of the upcoming 8th NFC award [which has been constituted] and first meeting for it which was to be convened on November 21, 2011 that has since been postponed made, was shocking. Referring to the agenda of the meeting he said and quoted “Item number two of the agenda of the 8th NFC award is matter of concern for Sindh province, which recommends that in order to implement reforms in GST it is necessary that collection authority for both GST on “services” and “goods”  be assigned to same agency (FBR) instead of Sindh Revenue Board.”

He said that under the 18th amendment the authority of the province regarding sales tax on services had been accepted. “It will be a great violation of provincial autonomy. Federal government should avoid reconsidering the settled issue.” he added.

Kaiser Bengali, who was also former adviser to CM on planning and development, further said that Sindh government has once again protested against this and the chief minister has written a letter to the prime minister of Pakistan to reconsider the decision.

He said that federal bureaucracy had been creating hurdles in giving provincial autonomy and said that after promulgating the presidential order in May 2010, the federal finance ministry put forth the position that value added tax (VAT) or RGST on goods as well as services to be collected by one agency (FBR). But after long deliberation the government of Sindh once again managed to convince the ministry that what unified collection was not necessary and showed that it would be possible for separate collection.

He said that after that the provincial government started collecting the tax on GST from July 2011 and performance of the board has been exemplary. “Over the last five months SRB has collected over Rs9 billion, averaging Rs.1.85 billion per month, which is 50% more than what FBR transferred to Sindh over the previous year, 2010-11,” he said.

He further said that SRB’s collection is certain to improve further, after existing legal and administrative bottlenecks are removed. “This accomplishment has proved sceptics wrong, who had been claiming that Sindh does not have the capacity to collect taxes,” he said.

Published in The Express Tribune, December 1^st, 2011.