ISLAMABAD: With the Seventh National Finance Commission Award about to complete its second year, the issue of collection and distribution of general sales tax on services and federal excise duty continues to create rifts between the provinces and the centre.
According to sources, Punjab, Balochistan and Khyber Pakhtunkhwa complained at a meeting held recently to review the implementation of the award that Sindh was collecting general sales tax on services like customs agents and ports but they were not getting their shares.
They demanded that these taxes should be transferred to the Federal Board of Revenue (FBR) and their shares reconciled at the earliest.
They said that they had so far been denied their share in the GST on customs agents and ports.
The sources said the Sindh government did not agree to the claim and offered to the three provinces to send their representatives to Karachi so that they could be given access to the computer data.
It said the Sindh Revenue Board was collecting GST on several services that legally and constitutionally fell in its jurisdiction.
The NFC considered constituting a committee to resolve the issue but no such decision has been made so far.
Sindh on its part complained that the FBR had collected about Rs1.16 billion and Rs600 million on two accounts of GST on services on behalf
of the provincial government during July 2011 and March 2012 but the amount had not been transferred to it.
The sources said the Sindh chief minister wrote letters to the federal finance ministry about two months ago, claiming the province’s share of Rs1.7 billion out of the GST on services being collected by the FBR. The FBR is reported to have told the finance ministry that Sindh’s stance is right and requested that the amount be transferred to the province, but the issue remains unresolved.
The Sindh government also complained that it had been agreed among the stakeholders that the FED would stand abolished when provinces started collecting GST on services. It said that although it had started collecting GST on services, FED had not been withdrawn and some taxpayers were not paying GST on the premise of paying FED, causing revenue loss to the province.
The Sindh government also complained that the FBR was not sharing taxpayers’ data relating to customs despite repeated reminders.
The NFC review meeting that primarily exchanges data relating to tax collection and provincial shares could not reach a consensus on sharing the customs data.
The sources said on Sunday that the sub-committees of the NFC, comprising finance ministers and secretaries, set up for reconciliation of FBR collections on behalf of Punjab, Khyber Pakhtunkhwa and Balochistan and GST collections by Sindh on port services could not meet over the past year.
The review meeting was given a draft of the NFC award implementation report for the third quarter of the current fiscal year. It said that total taxes in divisible pool between July 2011 and March 2012 stood at Rs1,211 billion, of which Rs29 billion had been set aside for the federal government’s collection charges and special allocations for the war on terror, leaving Rs1,182 billion in divisible taxes.
Of this, the provinces’ share was worked out at Rs700 billion, including war on terror expenses and special transfers to Balochistan. The rest was for the federal government.
Of the amount to be divided among provinces, Punjab received the lion’s share of Rs352 billion, followed by Sindh with Rs167 billon. Khyber Pakhtunkhwa’s share stood at Rs99 billion but reached Rs111 billion with the addition of the war expenses.
The share of Balochistan was worked out at Rs62 billion but it received Rs70 billion after inclusion of Rs8 billion special transfers.
