LAHORE: The Punjab Revenue Authority (PRA) has issued show-cause notices to the Punjab Mass Transit Authority (PMTA) and the Lahore Development Authority (LDA) for not depositing about Rs20.2 billion sales tax from May 2016 to June 2018.

The Punjab Mass Transit Authority has been served a show-cause notice for non-payment of Rs12.7 billion tax against services. Similarly, the tax liable to be paid by the LDA has been assessed at Rs7.2 billion.

“The Punjab Mass Transit Authority has been issued a notice for not withholding and depositing taxable amount of Rs12.9 billion against services received from the China Railways Corporation during the aforementioned period whereas the LDA has been questioned over non-payment of Rs7.2 billion it made to different contractors for civil works done in the wake of the Lahore Orange Line Metro Train Project. Both parties have been given 10 days to reply to the notices failing which the aforementioned amount would be received with fine,” said a PRA official.

According to the Punjab Sales Tax rules, the PRA claims that both companies are bound to withhold and deposit the sales tax from the payments given to different contractors under section 14 and 19 of the Punjab Sales Tax on Services Act 2012. Thus they were found violating different provisions, forcing the PRA to recover the tax under section 52 of Punjab Sales Tax Act.

PMTA, LDA say the notices are unjustified and they will contest these at all forums

“Whereas it has been explicitly specified that you were required to withhold/deduct and deposit the sales tax on taxable services received for the aforementioned tax periods. But you have failed to do so, compelling the PRA to recover the tax worth over Rs12.919 billion from you,” reads the notice issued to the PMTA.

A similar notice has also been issued to the LDA for non-payment of over Rs7.22 billion.

On the other hand, the PMTA and the LDA say the tax payment notices are illogical and illegal.

“I don’t know how they (PRA) people assess and calculate tax on services. They know very well that the Orange Line Project is under construction and yet to be made operational. So when the project will become operational, the government will start receiving revenue / ticket fee from passengers for providing them services. Thus the Punjab Sales Tax must be calculated on such services and not on the payments being made from the Chinese loan the government is receiving for construction of the train project under the China-Pakistan Economic Corridor,” a senior PMTA official told Dawn.

He said the government was already being paid withholding tax deducted over the Orange Line payments from the loans being issued by the Exim Bank of China.

“We would take up the matter with the Punjab Revenue Authority as well as the Punjab government,” he said.

According to the LDA, the Punjab Revenue Authority should review the sales tax notice issued to it.

“Actually, the Punjab Revenue Authority people use to pick figures of amounts from budgets and payments, calculate / assess tax and issue notices to the public sector organisations without studying the activities undertaken by the departments,” an LDA official deplored.

“We will contest this notice as we consider it unjustified,” he added.

Published in Dawn, January 19th, 2019