Thursday July 18, 2024

KTBA seeks unified law for FBR, provincial boards for clarity

By Bilal Hussain
April 16, 2022

KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) and provincial revenue boards to consolidate laws on classification of goods and services and single sales tax return for clarity and better business environment.

“Even after ten years of devolution the Federal Board of Revenue and provincial revenue boards and authorities are at variance with respect to classification of services and goods,” said Karachi Tax Bar Association (KTBA) President Zeeshan Merchant.

“This has created extreme unrest and constant problems amongst the business community and caused a lot of chaos, confusion, harassment and litigation.”

He added that there were cases in courts worth trillions of rupees and this friction between tax authorities and boards played a major role in that.

He asked why a businessman would not go to the court if he was taxed twice for selling the same good or rendering a service. He would certainly go to the court and none of the authorities would be able to tax then.

“For instance, FBR says restaurant business is goods business while SRB says it falls under services. Then if someone buys cloth and has it stitched before selling, SRB says its fashion designing, while FBR considers it selling goods.

So, there are differences, and every tax authority tries to increase their respective tax revenues; but people suffer in between,” Merchant explained.

There were differences of opinion as to when a service should be taxed – at the origination of

service or the termination of

service. Sindh says it should be taxed at origination, while Punjab says it should be taxed at termination.

To resolve the variance on the subject it was better if a unified law was drafted and adopted by all tax jurisdictions, Merchant said, and added that they have also suggested this to the government in their budget proposal.

“The harmonisation will provide clarity and ensure a better business environment to promote trust and avoid discord amongst the federation and provinces,” he said.

He added that it would increase ease of doing business for businesspersons as they would focus on their business operations, while the clarity in the procedure would increase trust of taxpayers, which might eventually increase overall tax collection.

Additionally, KTBA president proposed that the issue of variance on goods and services should be settled by commonly adopting First Schedule to Pakistan Customs Tariff / PCT code used for classifying goods and services in custom duties or WIPO's NICE Classification used to classify goods and services in trademark matters.