GST saga: Provinces raise objections over federal bill

Provinces ask government to incorporate their recommendations if it wants an integrated sales tax regime, sources say.

ISLAMABAD: In another twist in the general sales tax bill saga, provinces have raised objections against the bill, asking the government to incorporate their recommendations if it wants an integrated sales tax regime, sources say.

The latest stance rebuts the federal government’s claim that it had taken the provinces on board before tabling the contentious bill. The objections also highlight the thorny path ahead in implementing the most crucial condition of the International Monetary Fund’s $11.3 billion suspended programme.

The provinces forwarded their recommendations on the bill on November 12, in a meeting with the federation on the issue of the integration of GST laws. The parties held negotiations on provincial GST bills and their integration with the federal bill.

The IMF had proposed that all taxes be collected under one roof as the provinces have capacity constraints. The federal GST bill contains such clauses which enable the Federal Board of Revenue to collect taxes on services on behalf of the provinces.

Under a condition of the IMF, Pakistan has undertaken reforms in the sales tax regime by withdrawing tax exemptions on over 600 items granted on political grounds. The Senate’s standing committee on finance has already unanimously recommended the approval of the GST Bill 2010.

The National Assembly’s standing committee on finance is going to debate over the bill before its final approval. The government has tentatively scheduled the NA session for December 20, with the single agenda of the GST bill approval.

The Senate’s standing committee on finance, while scrutinising the GST bill, had said that the federal bill was transposing provincial autonomy on many issues. Secretary for Finance Salman Siddique had then assured the committee that the provinces were on board and they did not have objections over the proposed bill.

Two provincial finance secretaries confirmed to The Express Tribune that they have submitted their recommendations for the consideration of the federal government. They said that the recommendations relate to provincial autonomy. They added that provincial drafts were not in their final stage, “as many issues were still unresolved.”

A senior official of the ministry of finance said that Pakistan wanted to complete the process before the IMF meeting so that it could request the body to restore its programme. The IMF delegation that attended the Pakistan Development Forum had clearly said that the programme would be restored only after implementation the GST law. Pakistan has given January 1, 2011 as the new date for implementation.

Pakistan is considering two options with the IMF if it manages to get the bill implemented: it may ask for a three-month extension in the programme, which is going to lapse on December 30, said the official or it may negotiate a new programme from the IMF on stronger footing.

The federation and the provinces did not discuss the fate of seven disputed services either. There is a dispute between Punjab and Sindh over the ownership of these services as ownership would determine which provinces will claim refunds. The meeting will continue on Tuesday to hammer out differences.

Published in The Express Tribune, November 30^th, 2010.