The Lahore High Court issued notices for February 6 to the Federal Board of Revenue (FBR), Ministry of Finance and Federal Excise and Sales Tax Collector in a petition challenging the levy of the Federal Excise Duty on the franchise services.
The petitioner, a manufacturer of beverages, said the duty was being imposed unlawfully on franchise because it was not a service. "Franchise is not a service but a right or title conferred from one person to another with regard to use of any trademark or business name. It is a temporary transfer of right to use and cannot, by any stretch of imagination, be included in the definition of 'services'," the counsel argued.
The federal government in 2006, through Finance Act, 2006, item number 11 was added to the Federal Excise Act 2006, whereby Federal Excise Duty at rate of 5 percent of the charges is levied on the franchise services.
The petitioner said the amendment was entirely frivolous and contrary to the law as on June 5, 2006, through SRO 561(1)/2006, Rule 43-A was added to the Federal Excise Duty, which provided the detailed mechanism and procedure regarding the excise duty on franchise fee.
The counsel said under the Federal Excise Act, 2005, duty could only be levied on manufacturing or production of goods or the provision of services. "As the grant of franchise is not a provision of services, but is a transfer of right. Therefore it is not liable to levy of duty in terms of the said law," the counsel argued.
Comments
Comments are closed.