Court stay orders hamper revenue generation

PESHAWAR: The stay orders given by the courts against the payment of sales tax on services to major business operators, key professional sectors and individuals have affected the revenue generation in Khyber Pakhtunkhwa.

The provincial component of sales tax on services faced a deficit of about Rs2 billion during the last financial year.

The Khyber Pakhtunkhwa Revenue Authority (KPRA) was given the target of Rs12.5 billion for the financial year 2017-18. However, it managed to collect Rs10.91 billion during the fiscal year.

Talking to journalists at his office on Wednesday, Director General (DG) KPRA Nasir Khan said the target could not be met due to a number of reasons, including the stay orders obtained by some major service providers.

The documents shared with the media persons showed that private hospitals, public sector telecom companies, doctors, lawyers, construction services associations, consultancies and restaurants were among those that obtained stay orders from the courts to avoid payment of sales tax on services.

Nasir Khan said the tax amount owed by those who obtained stay orders has not been computed yet, but it may come to hundreds of millions of rupees.

“There is a judgement of the Supreme Court that no stay should be given by the courts in tax related cases beyond six months,” he recalled. He pointed out that the stay orders in KP have been in force for years now.

He pointed out that the province was earlier heavily dependent on the telecom sector from which it collected Rs5.27 billion last fiscal year. He added that owing to the Supreme Court’s orders preventing collection of sales tax on services from the sector, the collection in the first three months of this year dropped by 75 percent.

“However, we are now striving to get these stay orders vacated to streamline collection from all sectors,” Nasir Khan added.

He maintained that the provincial government through its advocate general was helping the KPRA to come out of the litigation.

The KPRA DG also sought documentation of the erstwhile federally and provincially administered tribal areas on the lines of the work done by the Federal Board of Revenue (FBR) to document the potential taxpaying sectors in these areas. However, he admitted that under government orders no duties and taxes would be charged in the erstwhile Fata for five years.

He said the KPRA was in a push to the broaden tax base in the province and an intensive registration drive to bring potential sectors into the tax net had already been initiated.

He said that sales tax on services was a complex area. “The number of registered taxpayers has risen to 4,700 during the current financial year 2018-19. “It is a significant increase considering the fact that there were 500 registered taxpayers only when the KPRA started functioning in 2013,” he added.

Nasir Khan expressed the hope that number of the registered sectors would rise to 6,000 during the current year.

About the current fiscal year target, the DG said they had been given Rs15 billion target while Rs1.47 billion has been collected since July 1.

“We collected Rs10.9 billion last year, while the FBR used to collect Rs4 to 5 billion per annum in KP prior to the establishment of the KPRA,” he said. He said the FBR still owed the KPRA Rs1.92 billion on account of cross-adjustment during 2017-18.

He said KPRA was being strengthened in terms of human resource hiring and capacity building, adding they were going to initiate Restaurant Invoice Monitoring System (RIMS) on the pattern of Punjab in 20 selected hotels in Peshawar.