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August 30, 2019

Collection of sales tax on services drops 9.4pc to Rs202.88bln in FY2019

Business

August 30, 2019

KARACHI: Collection of sales tax on services dropped 9.4 percent to Rs202.88 billion in the last fiscal year of 2018/19, finance ministry’s data showed, as economic slowdown took toll on revenue .

Provinces collected Rs223.86 billion in the preceding fiscal year. The revenue collection declined due to slowdown in the economy and aftereffects of general elections held during the last year, people having knowledge of the matter said on Thursday.

Economic growth dipped to 3.3 percent in the last fiscal year from a decade high of 5.5 percent a year earlier.

Statistics released by the federal finance ministry showed that three provinces, except Balochistan, registered negative growth in the sales tax revenue collection. Provinces were empowered to collect sales tax on services under the 18th amendment into the constitution, passed on April 8, 2010. Sindh was the first province to make legislation for imposing sales tax on services within its jurisdiction in 2010.

All the provinces have established their revenue authorities to collect tax on services rendered within their jurisdictions.

Punjab posted a decline of 15 percent in revenue collection from sales tax on services for the fiscal year of 2018/19. The province collected Rs90.22 billion during the last fiscal year compared with Rs105.88 billion in the preceding fiscal year. The province faced a massive shortfall in the revenue collection owing to restriction on collection from phone service providers.

Collection by Sindh Revenue Board posed a 6.4 percent decline in revenue collection during the last fiscal year to Rs93.51 billion. The figure was Rs99.88 billion in the preceding fiscal year.

Revenue collection by revenue authorities of Khyber Pakhtunkhwa also fell 5.33 percent from preceding year’s collection of Rs10.35 billion.

Balochistan was the only province to post growth of 22.59 percent to Rs8.8 billion during the last fiscal year. The collection stood at Rs7.17 billion in the fiscal year of 2017/18.

Last fiscal year was not either good for overall tax revenue collection in the country. The Federal Board of Revenue (FBR) also failed to even reach the preceding year’s collection number.

The federal revenue collection agency collected Rs3.829 trillion in the last fiscal year as compared to Rs3.842 billion in the preceding fiscal year.

The revenue collection was much below the annual target of Rs4.4 trillion. Massive fall in revenue collection also resulted in a record fiscal deficit of 8.9 percent in the last fiscal year, which was 6.6 percent in the preceding fiscal year.

The tax-to-GDP ratio of the country fell to 11.6 percent in 2018/19 compared with 13 percent in the preceding fiscal year due to worst performance in revenue collection by the federal and provincial revenue authorities.

While tax collection by the FBR rose to Rs277 billion in July from Rs251 billion in the last month a year earlier, the collection was below the target of Rs292 billion. The FBR will have to collect Rs795 billion in the next two months (August and September) to achieve quarterly target of Rs1.072 trillion under the International Monetary Fund’s loan program.