The government has also decided that, following cabinet approval, the reformed general sales tax (RGST) bill will be tabled before November 1, approved by November 30 and enforced from December 1 onwards.
The RCG has further decided to form a fiscal policy board to streamline the implementation of tax reforms, being carried out for enhancing resource mobilization in the country and creation of fiscal flexibility in areas affected by floods.
The RCG, chaired by Minister for Finance Dr Hafeez Shaikh, deliberated tax proposals submitted by sub-groups on tax reforms. Official sources informed that during the meeting, a fervent debate was witnessed regarding the proposal of rolling back the PaCCS and handing over the customs clearance operations to PRAL, a subsidiary of the Federal Board of Revenue (FBR).
Some senior officials said that the proposal was backed by those with strong vested interests in its implementation and the meeting unanimously rejected the proposal for the permanent shelving of PaCCS. Officials added that the proposal for rolling back PaCCS meant negating customs reforms, which have started yielding good results.
The options given to the FBR include either purchasing the PaCCS software from the company concerned or signing an agreement with the company to run the system on a public-private partnership basis.
Official sources also informed that it has been decided that after gaining cabinet approval, the RGST bill will be tabled in the National Assembly and the four provincial assemblies before November 1. After a month’s debate, its approval will be ensured by November 30 and the RGST will be enforced from December 1 on goods and services.
Sources revealed that the RCG is still undecided as to whether to keep the RGST rate at 17 per cent or reduce it to 15 per cent. Sources also explained that no single rate will be adopted and five different rates will continue for different categories of registered persons. It has been decided though, that the RGST rate will not exceed 17 per cent.
Sources further informed that powerful lobbies are trying their best to retain GST exemptions on their local sales as well as on their exports.
The meeting also considered the proposal to continue the GST exemptions on exports of five major export-oriented sectors, which include textile, leather, sports goods, carpets and surgical instruments.
However, the participants of the meeting demanded the withdrawal of exemptions on local sales of these sectors to generate additional revenue.
Explaining the reason behind the demand for the withdrawal of exemptions on local sales, especially the textile industry, sources said that the industrial sector is exporting goods worth Rs1.7 trillion and their contribution in tax is just Rs12 billion due to the exemptions.
Published in The Express Tribune, October 19th, 2010.
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