Centre and provinces: Consensus on harmonisation of GST on goods and services reached

ISLAMABAD: In a major development, the Centre and the provinces on Thursday evolved a consensus on harmonization of GST on goods and services for implementing a single portal to file returns. It was one of the major conditions of the World Bank’s loan to harmonize the General Sales Tax (GST) on both goods and services. The GST on goods is the domain of the Centre while on services it is the jurisdiction of the provinces to collect GST.

This fragmented jurisdiction had created difficulties for the country’s business sector to file five returns of GST every month. It becomes cumbersome and enhances the cost of doing business manifold.

The Centre and the provinces have also agreed to resolve the lingering disputes on the jurisdiction of taxation on Toll Manufacturing lying with the federal government, the right to collect GST on transportation rests with the provinces, taxation on construction will be shared by Centre and the provinces as per constitutional arrangements and the right of GST collection on restaurants will be the domain of the provinces.

On the right of GST collection from restaurants, a heated debate occurred among the FBR and provincial authorities and finally Finance Minister Shaukat Tarin being Chairman NTC decided to accept the right of provinces to continue collection of GST. The FBR high-ups had argued that the goods were used for making food, so it should be their right to collect GST on behalf of the Centre.

According to the official announcement, Federal Minister for Finance and Revenue, Shaukat Tarin, presided over the meeting of the National Tax Council (NTC) at the Finance Division today. Provincial finance ministers, secretary Finance Division, chairman FBR, chairman Sindh Revenue Board and other senior officers participated in the meeting.

In his opening remarks, the finance minister welcomed the participants and emphasized the need for evolving a consensus between the Federation and the provinces in matters related to Sales Tax harmonization. He stressed upon the need to resolve tax-related issues in a spirit of cooperation between the Federation and the federating units.

The chairman FBR made a detailed presentation and outlined areas for further deliberation to work out an arrangement in a collaborative manner related to harmonization of GST amongst the federal government and the provinces.

The FBR and the provincial finance ministers narrated their respective positions on the taxation of transportation, restaurants, toll manufacturing and construction. Different proposals were also considered by the NTC for implementing a single portal for filing sales tax returns, which are being developed and are likely to be launched by the first week of October 2021.

The launching of a single portal for filing returns will cut the compliance cost for the taxpayers and will help increase Pakistan’s rating on Ease-of-Doing Index. It was decided that detailed input will be invited from Provincial Revenue Authorities (PRAs) for the development of a single sales tax portal acceptable to all. Similarly, the FBR shall also develop a standardized Income tax Return format, in consultation with the provincial governments.