ISLAMABAD, June 20: The federal government has decided to transfer 2.5 per cent of the 15 per cent General Sales Tax (GST) amount to provinces to enable them run their respective local government administrations.

Official sources told Dawn that the decision came at a meeting presided over by President Gen Pervez Musharraf, here on Thursday.

With the decision, the federal government would transfer an additional amount to the tune of Rs32 billion to provinces during the year 2002-03, they said.

According to the formula on the basis of which the amount would be disbursed among the provinces, Rs18 billion would be transferred in lieu of octroi and the remaining Rs14 billion would be distributed on the basis of National Finance Commission (NFC) award, they said.

It was the provinces, they said, that would distribute it among the district governments through provincial finance commissions (PFCs).

The government has projected an amount of Rs205.7 billion under the head of the GST for the year 2002-03 against the last year’s projection of Rs185.2 billion, an increase of 11.06pc.

Elaborating, the officials said the additional amount of 2.5 per cent in the GST was believed to be made to provinces to compensate for defunct octroi zila tax (OZT).

They further said that the executive board of the IMF would meet on July 3 to approve the next tranche of $109 million, out of $1.36 billion Poverty Reduction and Growth Facility (PRGF) programme.

The officials said the government had also constituted a high-level committee under the head of secretary-general finance Moin Afzal for decision in cases of anomalies.

The committee would receive the complaints by June 30 from all the stakeholders and would announce the decision within next couple of days, they added.

The distribution formula of the GST has remained a contentious issue among the provinces. The formula evolved during the Nawaz Sharif government stipulated that of all the collection under this head 62.5 per cent would be retained by the federal government and the rest, 37.5 per cent, was to be distributed among the four provinces according to population basis.

However, provinces, specially Sindh, expressed its reservations and the matter could not be resolved. Sindh claimed that its 47 per cent of the collection was made through octroi and zila taxes, which could not meet its needs.

A number of representations had also been made in this regard and the announcement may become another source of debate.