KARACHI, June 18: The bureaucrats in the federal finance ministry have not worked out as yet the distribution formula of the 2.5 per cent general sales tax (GST) amounting to Rs32 billion among the provinces.

President General Pervez Musharraf had decided, long ago, the distribution of entire 2.5 per cent GST (amounting to Rs32 billion) among the four provinces.

But the bureaucrats in the federal finance ministry are applying the 1997 resources distribution formula of the National Finance Commission (NFC) on this 2.5 per cent GST amount and wants to retain 62.5 per cent roughly Rs20 billion and distribute 37.5 per cent or Rs12 billion among the four provinces on the basis of population.

According to the federal budget documents released last Saturday (June 15), “while it has been decided in principle that 2.5 per cent GST would be transferred to the provinces, the distribution formula among the provinces has not been finalised as yet. The budget provides for distribution of GST in accordance with the NFC formula. The federal share in 2.5 per cent of GST is Rs20 billion is kept as a block allocation for transfer to provinces in accordance with the distribution formula approved.”

Well placed sources say that the Sindh Finance Minister Abdul Hafeez Sheikh has rejected the contention of the federal finance ministry, and asserted that President General Pervez Musharraf had decided the distribution of the entire amount of Rs32 billion among the provinces and that Islamabad has no authority whatsoever to retain any part of the 2.5 per cent GST.

The sources say that Sindh had made its position regarding share in the 2.5 per cent GST very clear to Islamabad long ago. In 1998-99 when Nawaz Sharif government decided to abolish octroi and zila tax, total collection of Octroi in Sindh was roughly 47 per cent of the total recovery in the country.

A rough estimate shows that Sindh generated more than 63 per cent of the total of more than Rs185 billion sales tax collected in the outgoing fiscal year. The sources say that Sindh government demands that either the octroi collection share in 1998-99 be treated as criterion or the share in the total GST of the current fiscal year be considered as another reference source.

Till late Tuesday afternoon, the federal government has not offered any reply to Karachi on the 2.5 per cent GST issue. The Sindh government is presenting its next fiscal year’s budget on Thursday (June 20) and the officials in Karachi waited till late hours on Tuesday to get information on the provincial share in the 2.5 per cent GST.

Since no information was available, the Sindh government is understood to have put in a tentative figure of the resources availability in the 2002-03 provincial budget.