SINDH might have been hit by civilian death toll like Khyber Pakhtunkhwa and closure of manufacturing units as in Punjab while sharing with Balochistan on missing persons count, it is, however, clearly ahead of all provinces in administering taxation on services.
Whereas all other provinces are still in process of finalising the rates and categories of services deemed taxable, Sindh has taken a lead by mapping services it desired to tax and enforcing them at the rate of 16 per cent under the Sindh Sales Tax on Services Act 2011.
The tax collectors’ achievement, however, has upset new tax payers. The service providers of Sindh find the practice unjust and discriminatory. "Why am I penalised with 16 per cent sales tax when my competitors in Quetta, Lahore and Peshawar so far remain exempted," a property dealer asked.
The lobbyists operating on behalf of the powerful service providers in Sindh state: "The services which are taxable in Sindh and not taxable in other provinces include advertising services (poles, billboards, web/internet, etc), port-related services (shipping agents, ship management, freight forwarding), services of property dealers (builders, promoters), services of contractual suppliers, services of money changers, franchise services and, construction services."
Sources privy to the developments on the issue told Dawn that many of these powerful stakeholders had approached people in Islamabad to defer implementation of the said Act till the time the relevant law was harmonised for all four provinces.
Dr Waqar Masood, federal finance secretary, admitted lack of uniformity in Services Acts passed by the four provincial assemblies. "These are teething problems. The committee of provinces’ finance secretaries that I head has been activated to iron out all folds. I assure you, all outstanding issues will be resolved amicably over time", he said over telephone from Islamabad.
"We met last in July before Ramazan where these difficult issues were deliberated. There were differences but rigidities are giving way to accommodation in a spirit of reconciliation and cooperation amongst provinces. It is a new path and it would be idealistic to imagine long seated mistrusts and acrimonies to disappear with the passage of certain legislation," another member of the finance minister’s committee said requesting anonymity.
"In their enthusiasm to self-govern, Sindh’s economic team seemed to have alienated itself from powerful service providers lobby. They do not have any concept of tax liability though they have been earning well. They will oppose the tax tooth and nail", warned a tax expert.
There is little denying the fact that the stark variance in the coverage of services in different provinces could upset the current balance in the country’s business environment.
"If services are taxed more heavily in Sindh, the service providers will move away from this province and go to areas where they find business environment friendlier because of lower or no tax. It will hurt more than help the provincial economy," said another businessman attempting to socialise the interest of his class.
However, the finance secretary of Balochistan saw difference in services legislations in four provinces rooted in their peculiar objective conditions. "It is a very complex issue and will take its time to emerge clearly. When different provinces seem to be at different stages of development with their own mix of sectors, I do not see total uniformity possible or even desirable", Wasim Jamaldini, finance secretary of Balochistan, told this scribe over telephone from Quetta.
He said Balochistan has a long way to go before it starts collecting service taxes. "We need time to gear up the provincial administrative machinery to take up to the challenge", Jamaldini commented suggesting two to four years period of restructuring of tax machinery in the province.
Tariq Bajwa, finance secretary Punjab, was optimistic. "It is true that Sindh is handling taxation on stand alone services at the provincial level. The telecommunication and banking services where there is overlapping or services where cross boarder distinction is hard to identify, the Federal Board of Revenue can do the job for us. The total collection made on this account is maintained in a separate account and redistributed amongst provinces under a formula", he said.
The federal government has transferred to the provinces net proceeds of GST on services of Rs16 billion in first half of 2010 including Rs8.8 billion to Punjab, Rs4.2 billion to Sindh, Rs2.2 billion to KP and Rs0.78 billion to Balochistan. Punjab received Rs7.95 billion as GST on services in CE mode from telecom and Rs0.888 billion from GST on provincial services. Sindh received Rs3.48 billion as GST on services in CE mode from telecom and Rs0.735 billion from GST on provincial services.
Khyber Pukhtunkhwa received Rs1.99 billion as GST on services in CE mode from telecom and Rs0.230 billion from GST on provincial services. Balochistan received Rs0.635 billion as GST on services in CE mode from telecom and Rs0.147 billion from GST on provincial services.
The economic and finance team of Sindh could not be reached despite repeated attempts Secretary Finance, Naveed Kamran was probably too busy to respond to media probes. Murad Ali Shah, provincial finance minister also was not available for comment.
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