KARACHI, Nov 8: Sindh wants restoration of provinces’ right to levy sales tax on electricity distribution, gas supply and on telephone calls.

It has also sought immediate withdrawal of federal authority which is now being considered a breach of the 1973 constitution.

“By any stretch of imagination and argument, electricity, telephone and gas are services and not goods and hence sales tax on distribution and supply of these services comes under provinces and not federation,’’ asserts Mr Taj Haider, a former PPP Senator who also represented Sindh on the National Finance Commission in 1995.

Mr Haider is now on a seven-member Sindh NFC committee formed to help two official negotiators of the province in NFC deliberations that should commence in the near future after completion of process of expansion of the federal cabinet.

In a communication to Sindh Chief Minister, Mr Taj Haider said that estimates show collection of almost Rs30 billion sales tax on electricity supply only in a year based on KESC and Wapda billing in the province. From this huge amount of sales tax, Sindh gets less than Rs3 billion in a year.

“Thus Mr Chief Minister, Sindh is getting less than one-tenth of what it should be getting under the Constitution on sales tax on services,’’ the former PPP Senator points out in his letter.

He reminded that the NWFP managed to establish its claim through arbitration for payment of accumulated profit arrears of Rs130 billion on hydel power generation.

Syed Sardar Ahmad, a former finance minister of Sindh who advocated his province’s case on the NFC during 2003 to 2005, said that he raised his voice during NFC proceedings against the federal government as it was a breach of the Constitutional right of Sindh and all provinces on the issue of sales tax on services, with particular reference to sales tax on electricity, gas and on telephone calls.

“Levy of sales tax on electricity distribution, gas supply and on telephone calls is a clear violation of the 1973 Constitution,’’ Sardar Ahmad declared.

He disclosed that the Federal Board of Revenue in its annual reports has shown Rawalpindi as a place of sales tax collection on phone calls which is misleading and amounts to cheat.

The senior MQM leader said that his party had already served a notice on the Sindh Assembly to move a resolution against federal government’s violation of the 1973 constitution to levy and collect sales tax on services, including on electricity distribution, gas supply and on telephone calls.

“The PPP members of the Sindh Assembly gave us verbal support on such a resolution,’’ he replied whether the MQM resolution enjoys the support of the ruling PPP. The notice on MQM resolution is still pending.

A former secretary of the Sindh finance department recalled that all provinces’ demand, in principle, the right to levy sales tax, and collection of sales tax on services be restored to the provinces.

He recalled that a meeting of elected representatives of the four provinces in Lahore in the first week of June demanded with one voice restoration of this constitutional provision to provinces.

Officials in Quetta, in last June, had expressed the view of collecting sales tax on exit point of Sui gas within Balochistan to the Sui Northern Gas Supply system. There is also a proposal to set up sales tax collection points on Balochistan’s borders with Punjab and Sindh on transportation of goods, particularly fruits and fish.

The Sindh Committee on NFC has so far held only one meeting and its second meeting is indicated to be held some time next week.

Taj Haider’s observations and his suggestions in the first meeting were not included in the minutes, and he has, therefore, dispatched a letter that the second meeting should not miss his position on sales tax on services.

Independent observers, however, doubt capacity of Sindh and other provinces in collection of tax services.

Total tax collection by all the four provinces is hardly 10 per cent of country’s revenue collection.

The World Bank proposed creating a single revenue authority in each of the four provinces instead of two and three agencies.

In Sindh, the government rejected this proposal where taxes are being collected by the excise and taxation department and by the Board of Revenue.

No serious efforts are being made to develop revenue generation and collection capacity in the provinces, which observers believe, will make provincial autonomy real and meaningful.