KARACHI: Though the Federal Board of Revenue (FBR) has moved ahead to resolve sales tax collection issue, the dispute between the provinces of Sind and Punjab remain unresolved over the issue of how to collect general sales tax (GST) on services under Section IV of the Punjab Sales Tax on Services Act 2012, Pakistan Today has learnt.
A high level meeting of financial experts of the Sind Revenue Board (SRB) and the Punjab Revenue Authority (PRA) met in Lahore to amicably resolve the matter, however, the difference of opinion remained unresolved. Meanwhile, the FBR played a neutral role to diffuse the tension but to no avail.
The Punjab province was insisting on implementing Section IV of the Act i.e. “Application of principles of origin and reverse charge in certain situations.” However, Sind was not ready to give up its legal right of sales tax collection.
Section IV of the Punjab Sales Tax on Services Act 2012, was termed illegal and unconstitutional by representatives of Sind. With implementation of this act, the service providers, rendering services in Sind would feel uncertainty, sources privy to the development told Pakistan Today.
If the PRA would look in to the matter, it would be clear that Sind’s reservations regarding the issue were legitimate, the sources said, while adding that otherwise representatives of Sind government would knock on the doors of the federal government which would result in this issue becoming a controversial national issue.
On this, the official of PRA had assured the official of SRB that the PRA itself would look in to the matter and would give due consideration to the reservations of Sind government and the matter would be resolved according to the constitution, they said.
It may be noted here that Punjab Assembly had approved Punjab Sales Tax on Services Act in which Section IV had been elaborated as follows: (1) Where a person is providing taxable services in a province other than the Punjab but the recipient of such services is resident of the Punjab or is otherwise availing such services in the Punjab and has charged tax accordingly, the person providing such services shall pay the amount of tax so charged to the government.
(2) Where the recipient of a taxable service was a person registered under the Act, he shall deduct the whole amount of tax in respect of the service received and pay the same with the government. (3) Where a person is providing taxable services in more than one province or territory in Pakistan including the Punjab, such person shall be liable to pay tax to the government to the extent the tax is charged from a person who is a resident of the Punjab or from a person who is otherwise availing such services in the Punjab. (4) Where rendering of a taxable service originates from the Punjab but terminates outside Pakistan, such person shall be required to pay tax on such service to the government. (5) Where a taxable service originates from outside Pakistan but is received or terminates in the Punjab, the recipient of such service shall be liable to pay the tax to the government. (6) The persons who are required to pay the tax to the government in terms of subsections 1, 2, 3, 4 and 5, shall be liable to registration for purposes of this Act and the rules.
Sources further said that with the implementation of this act, every resident of Punjab who ever rendered services in any province, had to deposit sales tax on services at PRA, which is the Punjab government’s new institution established to collect sales tax on services according to 18th Constitutional Amendment.
Earlier, Sind had decided to take up this issue with the federal government but it was waiting for the result of negotiations between the officials of both sides. SRB Chairman Shakaib A Qureshi had informed this development to Sind Chief Minister (CM) Qaim Ali Shah during a meeting held at the CM house a few days back, they said.
Moreover, the sources also said that a committee consisting of members from the business community, FBR, Punjab and Sind authorities would try to find a way out so that the issue could be resolved amicably between the stakeholders concerned.
