KARACHI: The Civil Aviation Authority is not liable to pay taxes under the Sindh Sales Tax on Services Act, 2011, the high court has declared.
Initially, the provincial government had demanded it pay the taxes since federal government departments have been devolved following the 18th Amendment. The bench, headed by Justice Ghulam Sarwar Korai, allowed, however, the petition through which the CAA had challenged the provincial government’s demand to pay Rs28 million as sales tax on services as per the law.
The CAA had taken the provincial government’s revenue and finance departments to court against the demand of tax on services provided at the airports.
The authority had claimed that being a federal government entity it was an autonomous body, having its own rules and regulations under the Civil Aviation Authority Ordinance, 1960. This law empowers the authority to levy taxes on airports, etc.
The authority informed that following the devolution of different federal government’s functions to the provincial governments under the 18th Amendment, the Sindh government had made amendments to the Sindh Sales Tax on Service Act, 2011.
Subsequently, the provincial government issued a notice to the CAA, informing that the latter is liable to pay 16 per cent sales taxes on services provided at the airport, including cargo handling.
On March 11, the board of revenue issued a final notice to the CAA, demanding 16 per cent tax on all the services provided at the airports and sought recovery of dues amounting to Rs28, 206, 201.
The bench following lengthy arguments from all the parties had earlier reserved its verdict on Monday.
The SHC declared that the CAA is not liable to pay services’ tax to the Sindh government. The bench also quashed the proceedings initiated by the board of revenue for tax recovery and demand notices.
Published in The Express Tribune, July 13th, 2013.