LAHORE: The Punjab Revenue Authority (Second Amendment) Act 2016 has replaced the provincial finance department’s controversial 2012 notification — SO(TAX)1-9/2011.

The act has been introduced after hundreds of litigants challenged the establishment of Punjab Revenue Authority (PRA) through a mere administrative notification in 2012, allowing it to collect sales tax on services.

The authority finally received a legal cover after the amendment bill 2016 was passed recently by the Punjab Assembly.

The Punjab Revenue Authority (Second Amendment) Act 2016 states: “It is notified for information of taxpayers and general public that the headquarters of PRA has been established in Finance Department Civil Secretariat Lahore, till further orders.

According to section 4 (Amendment in section 36 of Act XLIII of 2012) of the Act 2016, after clause (b) clause (c) has been inserted which states: “The Authority stands established under section 3 and shall be deemed to have been established with effect from July 2013.”

Sources told Dawn that the Punjab government had earlier failed to issue notification of formation of PRA under Section 3 of the Punjab Revenue Authority Act 2012 which resulted in growing number of litigations against the collection of 16 per cent sales tax by multiple services.

They said legal councils of ‘defiant’ services kept filing petition in courts against first notice of the authority, maintaining that PRA was illegally constructed and was never validly established by the provincial government.

Despite growing litigations, the authority had collected annual revenue under ST on services more in each passing fiscal year expect one fiscal year, but failed to meet annual fiscal targets because some large-scale services found it easy to challenge the authority in a court of law, sources added.

Out of total 62 services, PRA currently deals in services of air ticketing, toll manufacturing, international calls, infrastructure development cess, architects, travel agents, corporate legal consultants, etc. These appear to be major services which are in courts against PRA and paying negligible or no tax.

The services of air-ticketing and toll manufacturing have a potential to generate up to Rs8 billion sales tax each annually.

Official statistics show that PRA collection has increased from Rs37bn in 2012-13 to Rs61.7bn in 2015-16 and witnessed decline in 2014-15. The authority collected Rs43.6bn in fiscal 2014-15 against target of Rs95bn against collection of Rs44bn in fiscal 2013-14.

Sources said the constitutional cover to PRA would substantially help curtail litigation in courts and help PRA overcoming revenue collection shortfalls.

They said the authority was not ruling out the possibility that the PRA (Second Amendment) Act 2016 might also be challenged in a court of law.

However, authorities are confident that such petition would lose its ground in future and cases would be contested in courts on substantive grounds.

Published in Dawn September 24th, 2016