PESHAWAR: The Khyber Pakhtunkhwa Revenue Authority’s several cases of sales tax on services are stuck with courts with some pending decision for around five years, officials said.

KPRA director general Mohammad Nasir Khan told reporters here on Wednesday that there were around 20 cases wherein companies and businessmen had challenged the collection of sales tax on services in the Peshawar High Court.

He added that some of those cases had been awaiting verdict for since 2013.

KPRA chief says tax collection could surge to Rs30bn by 2023 if issues resolved

The litigant parties include the KP Bar Council, Contractors Association, PTCL, Chief Burger, Alliance Health Care and Rehman Medical Institute and other individuals.

He said the KPRA managed to collect Rs0.827 billion in construction and contracting services last year due to a stay order issued by the PHC in favour of the provincial contractors association and that it would have collected Rs2.11 billion as part of the last year’s annual development programme portion of civil works had those orders not been issued.

Mr Nasir said the authority set up in 2013 was ‘on track’ after the hiring of around 70 employees and that he was hopeful that the province’s sales tax collection would go up to Rs30 billion by 2023 if the pressing issues like litigation, staff and office shortage, and issues with the Federal Board of Revenue were resolved.

He however said compared to Sindh and Punjab, the size of KP’s economy was very small and that there was ‘ambivalence’ regarding the size of KP’s GDP, which was projected to 10 per cent of the country’s without any evidence on the ground.

“In hospitality sector, there’s a single top line hotel and nine multinational food chains in the province,” he said, adding that various surveys projected the provincial hospitality sector potential at Rs8 billion.

He said the KPRA was hopeful of collecting Rs500 million from the sector in 2018-19.

The KPRA chief said the province’s total contribution to the FBR and own taxes stood at Rs94 billion.

He said the authority was set up in 2013-14 and missed its revenue target for three consecutive years and that it was in 2016-17 when the authority managed to achieve its target.

Mr Nasir said the authority’s revenue collection in 2017-18 stood at Rs11 billion, while the suspension of taxes on mobile phone cards had also adversely impacted on their tax campaign.

A breakdown of figures shows that KP collected Rs5.27 billion from telecom sector, Rs1.1 billion as withholding tax, Rs725 million from banking and insurance sector and Rs3.81 billion from other sectors.

The KPRA chief said the FBR owed Rs1.92 billion to the KPRA during 2017-18 on account of ‘cross adjustment’.

He said soon after the KPRA’s establishment, the telecom sector accounted for almost all of its tax collection but that had come down to around 40 per cent implying that the province’s was diversifying its tax base.

Mr Nasir said currently, a huge area of the province was outside the tax net, which needed to be covered.

He said Malakand division accounted for 40 per cent of the province’s area and 25 per cent of population but it was a tax-free zone, while Hazara and southern parts of the province also contributed little to the tax net.

The KPRA chief said five central districts of KP, including Peshawar, Charsadda, Nowshera, Swabi and Mardan, which accounted for 10 per cent of area and 17 per cent of area, made the province’s whole economy.

He said the province’s urban immovable property tax collection amounted to Rs850 million, while around 70 per cent of it was collected from the provincial capital.

Mr Nasir said the PKRA had registered 4,700 people and was about to introduce the Restaurant Invoice Monitoring System in 20 restaurants of the provincial capital.

He said a tax facilitation centre had been established in Peshawar, while two were being set up in Abbottabad and Dera Ismail Khan.

Published in Dawn, September 27th, 2018