THE Clean Drinking Water for All (CDWA) project worth over Rs16bn was launched in Pakistan by the federal government and is being implemented by the provincial governments.
The project is primarily financed by the government of Pakistan. The implementation of the Safe Drinking Water and Hygiene Promotion Project will be in 28 focus districts from the provinces and three agencies in Fata (including the earthquake-affected areas of the NWFP, and Azad Jammu and Kashmir).
The multi-billion CDWA project will not only make clean water available to the general public exposed to water-borne diseases, but also promises considerable economic activity and will result in significant revenues to the government treasury through the Federal Bureau of Revenue.
Both federal and provincial governments must see whether genuine taxation as per rules is being applied by contractors and subcontractors and the 'goods and services' involved are being interpreted according to the applicable laws.
Some unscrupulous contractors and suppliers, including a multinational pump manufacturer, however, are trying to evade GST by combining supply and service activities by clubbing the two together and getting the exemption under the services head. This specifically applies to prefabricated plant houses and their installation.
Supplies of all types of items, including prefabricated plant houses, are liable to GST, while transportation, installation and construction (services) are exempted.
The FBR must, at this point of time, categorically clarify this misconception and construe through an official notification that the main contractors and their subcontractors are not exempted from the payment of GST in this project.
Authorities should not allow such unscrupulous contractors working on this project to deprive the government of huge tax revenues and confuse authorities about their cost benefits.
This lacuna in the law is being deliberately misinterpreted by these contractors, who are advising suppliers to follow this path of clubbing the services and supplies in order to evade taxes and cut costs. The good thing is that the provinces, with the help of local bodies, are monitoring the progress of the CDWA project rather closely and are serious about getting the anticipated results of the project.
They should also help the FBR to collect the significant tax amounts, which can again be used for the benefit of people of Pakistan.
SHAHID KHAN
Lahore
