KARACHI: In a bid to resolve the ongoing dispute between Sindh and Punjab over five major potential port services, an inter provincial meeting has been called in the federal capital today (Monday), likely to be chaired by Prime Minister Yousaf Raza Gilani.
Pakistan Today has learnt that both provinces seemed reluctant to compromise on their stance, which was delaying the implementation of the reformed general sales tax (RGST), a condition set by the International Monetary Fund (IMF) for the release of the next tranche.
The provinces had agreed on 193 services of 198 identified under the RGST, however, there was a dispute over five major services directly related to imports, exports and port operations.
The Ministry of Finance is haphazardly trying to resolve the ongoing dispute, a day ahead of week-long talks with the International Monetary Fund (IMF), sources privy to the matter told Pakistan Today.
Sources said a consensus was reached between the federal and provincial governments on the mode of sales tax collection on services during two-day talks last month. It was agreed that implementation of RGST on services was provincial subject and they could delegate powers to collect sale tax on services to the federal government if they liked. After that, the tax collection on services was divided into three categories.
The provinces are empowered to collect sales tax on services identified in category I that include hotels, marriage lawns, catering etc. In category II, the Federal Board of Revenue (FBR) will collect the levy and it will refund the amount to provinces after input adjustment, excluding telecommunication taxes that Sindh will collect itself.
In category III, Sindh also allowed the centre to collect taxes on banking, franchise, construction, advertisement etc, and the collected amount will be distributed among provinces through the agreed formula of distribution. Interestingly, Punjab provided a list of different services, later endorsed by Balochistan and Khyber Pakhtunkhwa, which included courier services, customs agents, stevedores, ship chandlers, travel agents, property developers and promoters and other port services to the federal authorities, with a request to include these services in category-III, which was strongly opposed by Sindh.
According to the agreed formula, Punjab will get 60.39 percent from the total collection of sale tax on services, Sindh 50 percent, Khyber Pakhtunkhwa 15.6 percent and Balochistan 10 percent, which will make it a total 136.01 percent, with the centre paying the additional 36.01 percent.
