ISLAMABAD: The government’s decision to increase the rate of general sales tax (GST) on all petroleum products to a whopping 27 per cent was challenged in the Supreme Court on Monday.

Petitioner Shahid Orakzai requested the court to declare the increase unauthorised and illegal and order the Oil and Gas Regulatory Authority (Ogra) to re-evaluate the prices of petroleum products.

Also read: Fuel prices cut, but sales tax increased

The law secretary and Ogra are respondents in the petition. It requests the court to also restrain the government from collecting the additional amount of GST till a ruling on the matter.

On Jan 31, the government had reduced prices of petroleum products but increased the GST rate from 22pc to 27pc, depriving the consumer of full benefit of falling oil prices in the international market. In the process the government will earn additional Rs12 billion in revenue this month alone.

The court requested to restrain the government from collecting additional GST till a ruling on the petition

Taking a suo motu on somewhat a similar case on June 21, 2013, the Supreme Court held that the government had no legal authority to levy and recover GST at the rate of 17pc from June 13 that year without getting the Finance Bill passed from the National Assembly.

The verdict had clarified that 9pc GST on compressed natural gas (CNG) in addition to already imposed 16pc was also unconstitutional and contrary to Articles 3 (elimination of exploitation), 9 (security of person), 24 (protection of property rights) and 77 (tax to be levied only by the parliament) of the Constitution as well as Section 3 of the Sales Tax Act.

The court had also asked the government to return the excess amount to consumers equal to one per cent in GST (17pc from earlier 16pc) recovered on petroleum products and CNG or any other taxable supplies from June 13, 2013.

Apparently taking a cue from that judgment, the petition asked whether a tax imposed by a federal law could be increased without amending the law and whether the rate/percentage of GST could be increased, specifically for a particular group of products.

It argued that regardless of intent, the increase or alteration in GST was utterly unconstitutional and absolutely illegal because the federal government did not move a money bill in the assembly as required by Article 73 (2a). It contended that no tax could be imposed, abolished, remitted, altered or regulated without a money bill.

The petition also drew the court’s attention to Article 77 which says that no tax can be levied for the purposes of the federation except by or under the authority of the parliament.

The petition said that under the law, GST was supposed to be a uniform or consistent sales tax and applied to all products at a general rate and could not vary from product to product. Thus in the eyes of the law, the verbal increase in GST by the prime minister is thoroughly illegal even though it was notified by the Federal Bureau of Revenue (FBR).

“The latest 27pc increase in sales tax on petroleum products is no more a general tax but has now become a special tax,” the petitioner said, adding that at this point of time there was no act of parliament which could impose or levy any special sales tax exclusively on petroleum products.

Therefore, it said, such a special tax on petroleum products would have serious fallout on GDP because revenues could not increase if energy, work and GDP levels dropped in the middle of a financial year.

Likewise, it added, the illegal special tax and proceeds thereof would also intermix and pollute the Federal Consolidated Fund and, therefore, needed to be stopped immediately.

Published in Dawn, February 3rd, 2015

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