HYDERABAD: Dr Kaiser Bengali, Sindh's non-statutory representative on the National Finance Commission, has expressed concern over the centre's attempt to reopen the matter of sales tax collection on services, recalling that in October last year a decision had been taken, through a consensus between provinces and the federation, that provinces will collect sales tax on services.
Dr Bengali said a point in the agenda of a meeting of the NFC scheduled for Dec 16 was bothering him.
The agenda reads: “Imposition of GST on services in an integrated mode and ancillary issue of its mode of distribution amongst provinces”.
President Asif Zardari had reconstituted the commission in August to work out the 8th NFC award.
“Even an amount of Rs9.3 billion (Sindh's collection in general sales tax during the first five months of the financial year) is underestimated because of certain procedural requirements. For instance, the centre has to withdraw federal excise duty (FED). Many companies argue that they will not pay us the GST as long as they are paying the FED. So once the FED is gone, our collection will increase,” said Dr Bengali when asked by the Dawn to comment on the issue.
He said that a notification was to be issued about withdrawal of the FED by the centre but it had not been done so far. “For us, the GST on services is a closed issue after record note signed by non-statutory members of provincial and federal finance secretaries in October 2010,” he said.
The Sindh government formed the Sindh Revenue Board (SRB) through an act of the assembly passed in June and it has started collecting GST on services since July this year.
When presidential order (PO) about the seventh NFC award was issued in March 2010, it did not have clause-12, which “allowed provinces, if they so desire, to collect GST on services,” he said.
Sindh again took up the issue with the president to have the clause included and a second PO was issued in May 2010, allowing provinces to collect GST on services if they so desire. But it did not deter the centre from continued to harp on the same tune.
The seventh NFC was signed on Dec 30, 2009 in Gwadar under which Sindh clinched major achievements because a multiple-factor criteria was agreed upon for the award of resources between provinces and the centre, contrary to previous NFCs which used a population-specific formula.
Dr Bengali said the seventh award was a landmark achievement as it made revenue part of NFC formula and recognised provinces' right to collect GST on services.
But the centre, he said, lingered on the issue and finally it was decided in October 2010 when a record of note was signed by federal and provincial secretaries of finance and non-statutory members of provinces.
Dr Bengali said that the SRB had collected Rs9.3 billion so far between July and November this year. On an average, a month's collection came to Rs1.85 billion which was higher than the centre's average share for Sindh, which amounted to Rs1.25 billion per month, he said.
“The collection clearly vindicates our [Sindh's] point that there has been transfer of resources from here to the centre and we were not getting our due share,” he said.
He said that Sindh was now getting 48 per cent more than average collection done by the centre. “If the centre is again talking about integrated mode of GST it is useless because it's a closed transaction now. We will discuss it in the meeting,” he said.
Sindh government's official position is that correspondence has been made by the provincial finance minister with federal finance ministry in this regard.
“Our finance minister is working on it… he will discuss it with his federal counterpart in Dec 16 meeting,” said Sindh Information Minister Shazia Marri.
She said the Pakistan People's Party had taken a principled stand on the NFC award in the light of Article 160 of the Constitution. “When we sit with friends we will settle the issue again. I think there is some communication issue in the issuance of agenda of the meeting but hopefully it will be resolved in the meeting,” she said.