Provinces asked to impose lower ST rate on services

The Federal Board of Revenue (FBR) has asked the provinces to impose a lower rate of sales tax on services as the provinces are already getting major chunk of revenue from Federal Divisible Pool.

This was stated by FBR Member Inland Revenue Policy Rehmatullah Khan Wazir at a post-budget press conference held here at FBR House on Monday. He was responding to a query on disallowing input tax adjustment through the Finance Bill 2016. In budget (2016-17), the right to claim input tax adjustment on provincial sales tax is proposed to be withdrawn through the Finance Bill 2016-2017.

Explaining amendment in the Finance Bill, Rehmatullah Khan Wazir stated that the FBR and provinces have been squabbling over the issue of input tax adjustment, which needs to be resolved. Provinces do not agree with the input adjustment claimed by the FBR whereas federal tax authorities do not give tax adjustments to the provinces. The issue of tax adjustment could be resolved through mutual understanding and consensus between the FBR and provinces. The FBR has also abolished Federal Excise Duty on services chargeable to provincial sales tax to avoid duplication of taxation. Therefore, the issues between FBR and provinces could be resolved through mutual consultation.

The government is giving around 57.5 percent share of revenue collection to the provinces under the Federal Divisible Pool. We have asked the provincial revenue authorities to have lower rates of sales tax on services, he maintained. FBR Member Inland Revenue Policy said the objections of the Sindh Revenue Board (SRB) on input tax adjustments would be removed in consultation with the provincial revenue board. The FBR is ready to sit with the SRB for the resolution of the issues pertaining to tax adjustments.

He said the Federal Excise Duty (FED) at 16% is leviable on services such as Advertisement on CCTV / Cable TV, Shipping Agents, Banking Companies, Insurance Companies, Co-operative Financing Societies, Modarbas, Musharikas, Franchise Services, Stevedores, Stock Brokers, and Forex Dealers. Provinces and various Chambers of Commerce & Industry have demanded withdrawal of FED on such services as provinces are already charging sales tax on these services. FED on these services on which provinces are collecting sales tax is being withdrawn. The issue of duplication of sales tax on telecommunication services has already been resolved by the FBR, Rehmatullah Khan Wazir added. -Business Recorder