KARACHI: The formation of an administrative body for tax collection functions- the Sindh Revenue Board – has been delayed for a year. Simultaneously, the provincial government has delegated the federal government to collect general sales tax (GST) on six major service categories.
The levy will be collected under the auspices of the Federal Board of Revenue (FBR), Pakistan Today has learnt from reliable sources. After much wrangling, consensus was forged on the 7th National Finance Commission and the 18th Constitutional Amendment; the federal government formally transferred the rights of collecting GST on services to the provinces.
However, Punjab, Khyber Pakhtunkhwa and Balochistan allowed the centre to collect these taxes as they lacked a suitable mechanism for conduct the process itself. However, Sindh was the only province that refused to relinquish this right and determined that it would frame its own tax collection mechanism.
Sources revealed that efforts had been on track a few months back; the Sindh government had established the Sindh Revenue Board in the Resources Wing of the Finance Department. Former Federal Sports Secretary Nazar Mahar had been nominated the board’s chairman.
Two other former bureaucrats – Mumtaz Ali Shaikh and Akhtar Jameel – were also appointed on contractual basis to the tax collecting body and a summary was forwarded to the Sindh Chief Minister seeking his permission to induct other experts in the body, however the approval is pending till date.
The board’s office was established in the barracks of the Sindh Secretariat and three officials of the board were allotted a single room with a private secretary with no functions. The summary sought proper resource allocation for the new body in the budget
and permission was sought for the appointment of at least five posts of deputy directors, three regional commissioners, a deputy commissioner for each district, four tax inspectors for each district and other lower grade staff for the board.
Sindh’s stance on its right to collect taxes on seven services was a major hurdle in the finalisation of the reformed General Sales Tax (RGST) across the country; it was a prerequisite to further loan tranches from the International Monetary Fund.
Now, the FBR will collect GST on six services – stewards, shipping agents, freight forwarding agents, courier services, customs agents and stock brokers on behalf of the Sindh government, under an arrangement outside the National Finance Commission.
The Centre and Sindh had already agreed in September to empower the FBR to collect tax on four major services on behalf of the provincial government sales – finance, banking and insurance, construction, franchises and advertisements.
The sources indicated that the Sindh government will shortly begin work on legislation to enforce the reformed GST on services and flood surcharge from January 1, 2011 and empower the FBR to collect tax on 10 services on its behalf.
Moreover, the finance department has been verbally instructed to delay the formation of the Sindh Revenue Board for a period of one year, as it is expected that the Centre will transfer the right to collect GST on all services to Sindh by next year, the sources stated.
