FBR declaration: Court questions GST rate increase

SC says executive can’t raise tax without parliament’s consent.

ISLAMABAD: Supreme Court of Pakistan on Wednesday questioned the ‘declaration’ issued by Federal Board of Revenue (FBR) to increase rates of General Sales Tax (GST) from 16% to 17% without approval of the Parliament.

A three-judge bench led by Chief Justice of Pakistan Iftikhar Muhammad Chaudhry termed Provisional Collection of Taxes Act 1931 as non-conforming to fundamental rights enshrined in the constitution, saying executive could not increase rates of taxes without consent of the Parliament.

Attorney General (AG) Munir A. Malik informed the bench that Federal Finance Secretary was very much in contact with the Finance Minister over the issue of increasing the GST rates.

Responding to the argument, the Chief Justice said even provisional taxes could not be imposed through executive orders and asked if such a step could be taken then why the government had to move the proposal in the financial bill for the Parliament’s approval.

Replying to the FBR lawyer Rana Shamim’s argument that GST was imposed only on taxable items, the Chief Justice asked why the board had not clarified that the nontaxable items such as edibles and life saving drugs were exempted.

Advocate Rana Shamim assured the bench that all exempted items such as vegetables, meat, milk, eggs, red chilies, fish, drugs, pulses, fruits and poultry were not taxed with the GST.

The AG’s argument that executive through delegated powers could increase tax rates did not impress the bench. Justice Chaudhry observed that the federal government imposed 19% GST on unregistered petrol pumps to penalise them for not being registered as taxpayers but it was the common man who had to pay the extra money.

“What would be the mechanism to refund the tax collected from the people through unconstitutional means,” the bench questioned. In response the AG said any verdict of the SC would have only prospective effect and the tax once collected could not be refunded.

Malik further said the money was collected from the people and had been deposited to the public exchequer. The Chief Justice asked how it could be ascertained that the tax charged from unregistered petrol pumps was forwarded to the government.

The bench directed the FBR counsel to submit a comprehensive report regarding the GST collection and adjourned hearing of the case till June 20 (today).