Double taxation on services?

Provincial governments have levied a 17 per cent General Sales Tax on certain services, in addition to the FED.

ISLAMABAD: Provincial governments have levied a 17 per cent General Sales Tax (GST) on certain services, in addition to the Federal Excise Duty (FED) being collected by the Federal Board of Revenue (FBR). The tax has been introduced on telecommunications, banking and insurance.

The FBR is already collecting an FED between 17 and 19 per cent on these services. Sources revealed that the introduction of the new tax by provinces has resulted in double taxation for these sectors.

It has been learnt that although Punjab and Khyber-Pakhtunkhwa have transferred the authority of GST collection to the FBR, Sindh has refused to pass on the collection rights.

The FED being charged falls under the Federal Excise Act while GST is part of the Provincial Finance Act. In order to rectify the situation, either the sections pertaining to FED will have to be removed from Federal Excise Act or the sections related to GST would have to be removed from Provincial Finance Act.

An official of the FBR commented that the matter has to be resolved immediately and if any of the provinces started charging the GST, it could create difficulties for companies operating in the abovementioned sectors.

He added that the situation was being reviewed by the FBR and clarity on the matter was expected as soon as the government makes a detailed announcement regarding the reformed GST.

Published in The Express Tribune, July 23^rd, 2010.