The Competition Commission of Pakistan (CCP) has issued a Policy Note to the Punjab Revenue Authority (PRA) and the Sindh Revenue Board (SRB) recommending to them to withdraw the exemptions granted to the informal, non-corporate transporters of goods, from sales tax on inter-city carriage of goods by rail or road.
The CCP took notice of the circulars issued by the Punjab Revenue Authority and the Sindh Revenue Board on September 1, 2015 and July 24, 2015, respectively granting exemptions to the informal transporters of goods from sales tax. The CCP observed that the exemptions granted to the non-corporate entities had placed the corporate sector at a competitive disadvantage.
The Policy Note stated that preferential tax treatment of different undertakings is a competition concern as it creates an arbitrary distinction between services providers, with some entities liable to pay sales tax while other providers of exactly the same services in the same market are excluded. Such discrimination has the effect of lowering the cost of one group, without taking into account efficient management or other economic factors, and relies instead on the government-created advantage.
Apart from creating the anti-competitive environment, the exemption also has the implicit effect of promoting the undocumented sector at the cost of the documented sector, which needs to remain a separate policy consideration.
The Policy Note recommends that the Punjab Revenue Authority and the Sindh Revenue Board withdraw the exemptions granted through their circulars, in order to ensure a level playing field for all the market players. It further recommends that Item No. 48 of the Punjab Sales Tax on Services Act, 2012 be amended to remove the exemption provided to individual owners of vehicles for carriage of goods.
The Policy Note has been issued under Section 29 of the Competition Act, 2010, which empowers CCP to review policy frameworks to foster competition in all spheres of economic and commercial activity and to suggest legislative changes to the federal and provincial governments.