ISLAMABAD: In a major development, the Centre and four provinces on Monday struck a broader consensus on harmonization of General Sales Tax (GST) on both goods and services--a move that will pave the way for the approval of a $450 to $500 million programme loan from the World Bank.
The National Tax Council (NTC), which met under the chairmanship of Minister for Finance Ishaq Dar on Monday, appreciated the stakeholders for building a consensus and settlement of the decision on the harmonization of GST for ease of doing business. With the decision, businesses will be able to file one return of GST every month instead of filing five returns as one portal for filing GST returns would be placed.
According to the official announcement, the FBR chairman and provincial stakeholders evolved a consensus to proceed ahead in the spirit of greater national interest for harmonization of GST under the umbrella of the National Tax Council (NTC).
In the past, a consensus was agreed but no change in subsequent laws was made; that’s why it resurfaced again. However, official quarters argued that there was a major difference this time as Sindh and all other provinces agreed in the noted official minutes of the NTC meeting that everyone agreed on the consensus of harmonization of GST on goods and services. “If there is a requirement, then the subsequent laws will also be changed,” said a top close aide to the minister for finance, adding that the Centre and provinces had struck a consensus with the strategy of “give and take” for achieving a compromised agreement on a definition of goods and services in order to differentiate between the jurisdiction of federal and provincial governments.
Under the 1973 Constitutional arrangement, goods are the jurisdiction of the Centre and services fall under the domain of the provinces. The Centre and provinces struck an agreement to resolve lingering disputes on the jurisdiction of taxation on toll manufacturing which was with the federal government, the right to collect GST on transportation rests with provinces, and taxation on construction will be shared by the Centre and provinces as per constitutional arrangements and the right of GST collection on restaurants would be the domain of the provinces.
On the right to GST collection from restaurants, a heated debate occurred among the FBR and provincial authorities and finally NTC decided to accept the right of provinces to continue the collection of GST as the right of the provinces.
A close aide to Finance Minister Ishaq Dar said that he had convinced both sides to an consensus that the right of collection should be accepted in favor of those who could collect effectively and efficiently because ultimately it was aimed at enhancing the size of the pie. He also reminded the provinces that around 60 percent collection of the FBR was returned to the provinces through a share of the NFC Award so the spirit of distribution of jurisdiction should be aimed at ensuring increased revenue collection. When asked about the proposal for handing over the right of collection of Agriculture Income Tax (AIT) to the FBR, he said that the FBR footprint was quite limited and its officers could not go into far-flung villages so he had asked the provinces to bring the rate of AIT in line with the FBR’s rate of tax on taxable income brackets. “Instead of taking big steps, we can move forward by making small moves” he added.
The official statement stated that Punjab Finance Minister Muhammad Mohsin Leghari, Minister of State for Finance and Revenue Dr. Aisha Ghous Pasha, SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Mehmood Pasha, Secretary of Finance, Chairman FBR, Provincial Finance Secretaries and other senior officers of Finance Division attended the meeting. The meeting reviewed the progress on the decisions of the last meetings of the NTC on the harmonization of GST across the country. The finance minister said that in order to have ease of doing business, harmonization of GST was important. Further, GST harmonization will be a major step towards completion of policy actions under World Bank’s RISE programme.
The participants shared their opinions on the harmonization of GST. Pakistan is eyeing to secure World Bank’s program loan titled Resilient Institutions for Sustainable Economy (RISE)-II to strengthen the fiscal framework, promote growth and transparency.
The proposed operation for a loan of $450 to $500 million focuses on improving fiscal management and fostering growth and competitiveness.