Increase in sales tax unacceptable: CJP

Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry on Thursday said the way interim sales tax had been imposed was not acceptable, adding that Parliament’s role would come to an end if permission was accorded to levy tax in an interim way, without adoption of an act by the legislature.
“We are not restraining the government from levying tax… but it should have adopted a legal and constitutional mode to do so. Obviously the government cannot run without charging tax… the way interim sales tax has been slapped is not acceptable however. If levying of taxes in an interim way is allowed, Parliament’s role will come to an end. No one will resort to Parliament if rulers impose taxes on their own,” said the CJP in his remarks while presiding over a three-member bench of the Supreme Court (SC) during hearing of the suo motu case on the imposition of General Sales Tax (GST). Attorney General (AG) Munir A Malik, Ikram Chaudhry, Suleman Akram Raja and counsel for FBR Rana Shamim completed their arguments.
This extra money that will be collected has to be spent for the welfare of the people. Given these principles, the court questioned the justification of a tax that caused spiralling inflation. Government increased one percent tax and inflation soared fifteen fold, noted the court.
“If FBR works properly, quite a lot of revenue can be collected. But if the government increases this tax in the manner it has done so, then what role will the parliament play? Amendments in the sales tax act can be made subject to approval of the Finance Bill (FB). The highest level of sales tax is 16 percent. How can it be charged at the rate of 25 percent?” the chief justice argued with the government’s counsels.
Ikram Chaudhry argued that the issue started from the budget speech of the finance minister. After his speech, prices of all commodities increased. The 1931 Advance Tax Collection Act is in clash with article 77 of the constitution, he said.
The CJP said the state should go to all extremes to protect rights of people. He said the tax slapped on CNG was dubious. The state can survive only when rights of people are protected, he stated. The chief justice said money charged illegally from the people should be returned to them.
Ikram Chaudhry said the prices of commodities decreased on religious festivals in all foreign countries with varying religions but regretted that prices surged to record highs during Ramadan in the Islamic Republic of Pakistan.
Raja Shamim, counsel for Federal Board of Revenue, argued the impression of recovering 26 percent tax was wrong and that in reality a tax of 16 percent was being levied.
The CJP remarked, “You have to recover 16 percent tax at any cost. Consumers are not responsible for the loss or expenses of owners of petrol pumps. The tax ratio has climbed to 25 percent after recovering 16 percent additional tax.”
The AG contended that rules explaining methods of levying additional taxes were in conflict with the constitution and were a flagrant breach of it. Pump owners charge additional tax to compensate for arrears and the amount owed by them under other heads to gas company.
The AG prayed the court to not give a retrospective ruling in the case in light of the 1931 Act.
The court reserved its judgment which will be announced on Friday (today).