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Provinces demand limiting of FBR powers on sales tax

Updated March 12, 2019

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Provincial revenue authorities say the levy and receipt of tax on services come under their purview and not the FBR.— Photo courtesy of the board
Provincial revenue authorities say the levy and receipt of tax on services come under their purview and not the FBR.— Photo courtesy of the board

LAHORE: Provincial revenue authorities unanimously agreed on Monday that 17 per cent sales tax being received by the Federal Board of Revenue (FBR) from distribution companies (Discos), National Transmission and Despatch Company (NTDC) and oil marketing companies (OMCs) on combined goods and services should be segregated.

They opined that the levy and receipt of tax on services comes under their purview. They further agreed to take up the issue with the federal government in order to limit FBR’s recovery of sales tax on goods alone and not the services.

“There is consensus among all revenue authorities that there is a portion of services in the tax on combined goods and services. But the FBR, in this head, is receiving 17pc sales tax. So we think that levy and recovery of sales tax on services comes under our review,” PRA Chairman Javed Ahmad told Dawn while sharing issues that came under discussion in a joint meeting of the revenue authorities of Punjab, Sindh, Balochistan and Khyber Pakhtunkhwa.

The authorities said the definitions of goods and services have been defined well in the law. They see electricity cost, power transmission charges, oil price as goods. The levy and recovery of sales tax on goods fall under FBR’s power. However, they believe that the margin, services charges and commission on electricity distribution and transmission and commission/margin on oil have been defined as services that come under purview of the provincial revenue authorities. “The authorities in the meeting were of the view to get this mix/combined goods and services/supply portion segregated, enabling us to receive tax on services,” the PRA chief explained.

Inter-provincial communications portal launched

Meanwhile the participants also discussed other issues regarding taxation of the telecom sector, digital economy and development of an early warning mechanism among the four authorities. An Inter-Provincial Communications Portal developed by the PRA was also launched on the occasion. The portal will allow the four revenue authorities to keep in touch with each other and share ideas and matters of mutual interest electronically.

“I acknowledge importance of such meetings to ensure that all provinces work together to improve economy, revenue and promote ease of doing business. I think such meetings should be held regularly,” said Punjab Finance Minister Makhdum Hashim Jawan Bakht while addressing the event.

Earlier during a joint press briefing, Sindh Revenue Board Chairman Khalid Mehmood termed such meetings necessary for the resolution of taxation issues faced by the business community and for providing an enabling environment for the ease of doing business in provinces.

Published in Dawn, March 12th, 2019