The court directed the government to collect GST at the rate of 16% till the passage of the Finance Bill 2013-14. PHOTO: AFP/FILE
The Supreme Court on Friday declared unconstitutional the 1% increase in general sales tax (GST) announced in the federal budget.
The ruling forced the government to immediately reverse its decision of increasing fuel prices.
A three-judge bench, headed by Chief Justice Iftikhar Muhammad Chaudhry, said that the tax cannot be increased until Parliament passes the Finance Bill 2013-14 and the president signs it into law. The bench was hearing a suo motu case regarding the collection of increased GST.
The court directed the government to refund money collected from the public on the sale of petroleum products and other items and to deposit the sum at the registrar office.
“If the sales tax imposed by Parliament is to be recovered with retrospective effect, the amount deposited in the registrar office should be paid to the government, otherwise an appropriate order will be passed for its disbursement,” Justice Chaudhry said.
The court also declared the collection of 9% sales tax, over and above the normal 16% GST, unconstitutional and directed the authorities to refund this amount immediately.
The government was allegedly collecting a 9% additional GST on the sale of CNG for the past year.
The court directed the government to collect GST at the rate of 16% till the passage of the Finance Bill 2013-14.
“Immediate recovery of sales tax from 16% to 17% on the value of taxable supplies from June 13 is unconstitutional,” the court’s order stated. “It is contrary to Article 3 (elimination of all forms of exploitations), Article 9 (security of life and liberty of the people), Article 24 (No person to be deprived of his/her property compulsorily) and Article 77 (No tax is to be levied without an act of Parliament) of the Constitution.”
The bench also struck down Section 4 (declaration for provisional taxes to be considered law till it is made law by parliament) of the Provisional Collection of Taxes Act 1931 terming contradictory to Article 70 (Enactment of a bill by both houses of Parliament) of the Constitution.
This implies that no executive order can replace an act of parliament even for a certain period of time provisionally.
Petroleum prices slashed
Subsequently, the Oil and Gas Regulatory Authority (Ogra) on Friday issued notifications to cut CNG prices and reverse the hike in petrol prices bringing it to the level of June 1.
The government slashed fuel prices, decreasing the price of CNG by Rs1.97 per kilogramme. It had increased petrol prices up by Rs1.07 per litre, following the increase in GST from 16% to 17%. With the court’s order on Friday, petrol price is reverted to Rs99.77 per litre.
The government had been charging 25% GST on the CNG sales which increased to 26% on June 13.
According to a notification, the government had reduced the prices of CNG by Rs1.97 per kg in Region-1, comprising areas of Khyber-Pakhtunkhwa, Balochistan and Potohar Region (Rawalpindi, Islamabad and Gujarkhan) and Rs1.28 per kg in region 2 comprising Sindh and Punjab (excluding the Potohar Region). Thereby, the new price of CNG stands at Rs72.93 per kg in Region 1 and Rs64.90 per kg in Region 2.
The increase in GST from 16% to 17% allowed the government to earn Rs1 billion per month additional revenue on the sales of petroleum products.
The price of diesel (high speed diesel) is now at Rs 104.60 per litre. Kerosene oil is now sold at Rs 93.79 per litre. The new price of HOBC is Rs125.48/litre.
Published in The Express Tribune, June 22nd, 2013.
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