News
Saturday, July 24, 2010
Banking, insurance, telecom sectors face double taxation
* Punjab, Khyber Pakhtunkhwa have levied 17% GST on sectors, while federal govt collecting Federal Excise Duty from same sectors
By Sajid Chaudhry
ISLAMABAD: The government’s economic mismanagement came to light on Friday when Punjab and Khyber Pakhtunkhwa informed the federal government that they had imposed a 17 percent General Sales Tax (GST) on banking, insurance and telecommunication sectors in their budgets. At the same time, the federal government is levying the Federal Excise Duty (FED) on these three services, which is clearly double-taxation from these sectors, official sources informed Daily Times on Friday.
Both the provinces have now asked the federal government to either withdraw its taxes from these services or legally guide the provinces to remove the GST.
The issue was discussed during a monthly meeting of the finance secretaries of the provinces, which was chaired by Finance Secretary Salman Siddique.
Federal Bureau of Revenue Chairman Sohail Ahmed and his team of tax managers were also present in the meeting.
The finance secretaries of Punjab and KP represented their provinces, while senior officials from Sindh and Balochistan attended the meeting on behalf of their finance ministers.
The Punjab and KP officials informed the FBR about their decision to levy GST on telecom, banking and insurance services. On the other hand, the FBR is also collecting FED in the form of Value Added Tax (VAT) from these services under the Federal Excise Act. In both the provinces, the GST on telecom, banking and insurance services has been imposed through the Punjab Finance Act, 2010 and the Khyber Pakhtunkhwa Finance Act, 2010.
Official sources said that the two provinces had urged the FBR to resolve the issue, as telecom companies had approached them to obtain a legal viewpoint about the double taxation.
“Both Punjab and KP officials were concerned that the telecom companies, particularly mobile phone companies, were demanding the legal reasons behind the double taxation,” the sources said.
Legally, only the provinces have the authority to collect GST on these services. Both the provinces said that the FBR should either abolish the provisions about the FED from the Federal Excise Act or allow the provincial governments to withdraw the tax.
Official sources said another option for avoiding the double taxation was to stop Punjab and KP from collecting the GST until October when new GST rates would be implemented across the country.
However, no decision has been taken so far by the provinces about the new GST rates on the services sector.
Sources said that the representatives of the provinces would brief their chief ministers about the new GST rules on July 27. They will also discuss the issue with legal experts before submitting their final recommendations to the federal government.
Courtesy www.dailytimes.com.pk