ISLAMABAD, Nov 23: Amid noises of the opposition and some volatile allies, the government told the Senate on Tuesday it would stand up to a “powerful lobby” opposing general sales tax (GST) reforms to protect their interests, at the start of a debate on two controversial money bills on which the upper house can only make recommendations.

A soft-spoken Finance Minister Abdul Hafeez Shaikh seemed quite firm in his opening speech in rejecting opposition fears the bills proposing the GST reforms and imposing a new flood tax for only six months would bring unbearable burdens for the Pakistani people at a time of high inflation and determined to push them through parliament.

He said the General Sales Tax Bill would end exemptions enjoyed by a “powerful lobby” he blamed for distorting the GST regime over the past 20 years of its existence since 1990 and should actually bring down prices with the application of the tax at a reduced uniform rate of 15 per cent from the present rates of 17-25 per cent.

And he said the one-time 10 per cent surcharge on income tax and an increase in central excise duty on items like luxuries and cigarettes proposed in the Finance (Amendment) Bill would not hit the common man.

The minister talked of unspecified quarters which, he said, had “defaced” the GST regime by getting “all kinds of exemptions” and were seeking to thwart reforms by making noises and using pressure. “We want to stand up against them.”

Both the bills were introduced in the National Assembly on Nov 12 before being tabled the same day in the Senate, which, under the Constitution, can only make recommendations on money bills to the lower house which may accept or reject them when it meets next.

There was a brief uproar at the start of the Senate session after Chairman Farooq H. Naek asked the leader of the house, Syed Nayyer Hussain Bokhari, why neither the finance minister nor Minister of State for Finance and Revenue Hina Rabbani Khar were present and said it appeared that the consideration of the two bills might not be taken up for the day.

But after some angry remarks from the opposition benches as well as the government–allied MQM, both Mr Shaikh and Ms Khar soon arrived in the house and the chair went ahead to take up the agenda.

The MQM seemed less a coalition partner than an opposition darling, with its Shipping Minister Babar Khan Ghauri accusing the government of grounding a PIA plane at London's Heathrow airport on the pretext of a technical fault since Monday so its member Ahmad Ali could not attend a meeting of the Senate Standing Committee on Finance that he headed.

Mr Bokhari rejected the allegation as without substance and said Mr Ali's presence and expected opposition to the bill in the committee would not have made any difference because of the government's majority in the 12-member body, which chose another chairman to stand in for the MQM member.

However, strangely, neither Mr Bokhari nor Law and Parliamentary Affairs Minister Babar Awan responded to an objection raised by PPP's Raza Rabbani, who is the prime minister's adviser on inter-provincial coordination, against taking up the GST bill without a prior legislation and resolutions of provincial assemblies as a consequence of the 18th Amendment, which transferred sales tax on services to provinces with the abolition of the Concurrent List.

Mr Shaikh said the opponents of the GST reform were most afraid of the proposed use of automation that would record their transactions and show taxable incomes and were only using the name of the poor as their “old tactic” although this tax would not apply to items used by the common people such as edibles like poultry, meat, vegetables, fruits, life-saving drugs and educational institutions, and that even small traders' exemption would be raised to an annual turnover of Rs7.5 million from the present Rs5 million.

Opposition leader Wasim Sajjad of the PML-Q said he feared a 25 per cent “inflationary impact” of the proposed measures through which, according to him, the government wanted to raise an additional Rs25 billion a year. He called for a “review” of the proposed legislation, cutting government expenses, taxing luxuries and getting out of what he called IMF “shackles”.

But his party colleague Tariq Azim Khan, who spoke earlier, was less harsh and asked for more explanations of ways of documentation and stoppage of leakages and wrong refunds.

Haji Mohammad Adeel, parliamentary leader of the government-allied ANP, said his party would not vote for the two bills if the government did not accept its conditions, including withdrawal of increase in the CED, uniformity of property tax in cantonments for civilian and other residents and exemption of all locally-produced foodstuff (including those in packages), life-saving drugs, health equipment and educational materials.

The debate will continue on Wednesday.

ISLAMABAD: The provincial governments have agreed to finalise their draft laws on sales tax on services by next week for introduction in the provincial assemblies as part of an assurance given to multinational donor agencies.

“The provinces will finalise their draft laws on tax on services by Nov 28. The federal government is working with the provinces on the laws,” federal Finance Secretary Salman Siddiqui informed a meeting of the Senate Standing Committee on Finance on Tuesday. He said the provinces had agreed, in principle, to allow the Federal Board of Revenue to collect sales tax on their behalf on certain services. However, he added, Sindh wanted to collect the tax on some services on its own.

Mr Siddiqui said that there would be a single rate of sales tax on all services in all provinces and same procedures for audit and collection.

“We cannot do anything without the provinces' support for the reformed general sales tax bill,” he said, adding that the provinces were on board over the mode of collection of tax on services.—Staff Reporter