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Reformed sales tax bill clears first hurdle
ISLAMABAD:
A Senate panel on Tuesday unanimously approved the contentious reformed General Sales Tax (GST) Bill 2010 in a giant, symbolic step before its final approval by the National Assembly (NA). The bill would be discussed in the NA standing committee on finance from December 2 before being put to a final vote in the assembly.
Meanwhile, the panel also approved the flood surcharge and a 100 per cent increase in special excise duty rate.
The passage of the bill will help broaden the tax base by bringing over 600 exempted goods under the tax net including textiles, pharmaceuticals, leather and sports goods, packaged milk and food, tractors, fertilizers and bakery items.
While the Muttahida Quami Movement (MQM) boycotted the proceedings of the committee for a second consecutive day, no other party, including the opposition Pakistan Muslim League-N (PML-N), opposed the bill. The chairman of the committee, MQM Senator Ahmed Ali, did not attend the meetings.
MQMs boycott paved the way for its unanimous passage by the Senate standing committee on finance and revenue that met under Senator Islamuddin Shaikh of the Pakistan Peoples Party (PPP).
The MQM is playing to the gallery. If it is serious about taxing agriculture, why did it not amend the federal legislative list when it was part of the constitutional reforms committee that drafted the 18th amendment, said Hina Rabbani Khar, the minister of state for finance.
MQM demands levying of income tax on agricultural income, presently a provincial subject under the constitution.
Notwithstanding the political rhetoric, the PML-N senator Ishaq Dar neither proposed any amendment nor opposed the approval of the bill.
Federal Finance Minister Hafeez Shaikh said the reformed GST is aimed at correcting past political mistakes. If we did not support each other in difficult times, we will be harming not only ourselves but the country at large, said Shaikh.
Foreign powers offer only temporary solutions to Pakistans problems and desert the country after achieving their objectives. We have to be able to stand on our own feet, he added.
The Senate panel introduced certain amendments in the original draft but they are not binding on the government due to the recommendatory nature of the panel.
Subject to the NA approval and its implementation from January 1, 2011, the reformed GST, flood surcharge and increase in special excise duty rate would fetch an additional Rs60 billion in revenue in six months.
Chairman FBR Sohail Ahmad said the most crucial part of the reformed GST bill is section 52 which restricts a registered taxpayer from supplying to an unregistered person without issuing them a sales receipt. There will be no more business with anonymous persons, as section 52 aims to document the previously undocumented economy, said Abrar Ahmad, member sales tax FBR.
Earlier the government had to face an embarrassing situation when a law ministry official admitted the reformed GST bill passed by the cabinet was not vetted by the law division because of time constraints.
Pakistan was under pressure to table the bill in the cabinet before the Pakistan Development Forum meeting kicked off in Islamabad on November 14, said Malik Hakim from the law ministry. PPP Senator Safdar Abbasi also pointed out that the incongruence of the FBR and the law ministry on certain issues.
Secretary Finance Salman Siddique said the bill did not compromise the provincial autonomy granted under the 18th amendment in the constitution. He said there was a general agreement with the provinces on the issue of reformed GST implementation and the FBR would only exercise that authority which would be delegated to it through provincial legislation.
Published in The Express Tribune, November 24th, 2010.
