Through the budget 2015-16, the Punjab government has included ten new services - public relations services, services provided by chartered accountants, auditors, corporate law consultants, etc, air travel and transportation of goods by air (previously taxed by the federal government), chartered flights, hiring of equipment and machinery services, debt collection services, supply chain management services, photography services and sponsorship services.
As per Finance Bill 2015, inclusion of these services will further bring equity to the Punjab Sales Tax base and also harmonize the service tax system of Punjab with other provinces. The exemption to immovable property in urban areas valuing one million rupees from Capital Value Tax has been withdrawn in a bid to enhance equity on taxation on the immoveable property transactions.
Through the bill, some technical amendments have been proposed in the Punjab Sales Tax on Services Act, 2012 with a view to cover the issues relating to the concept of forensic audit, harmonization of record maintenance provisions with the Federal Board of Revenue, rationalization of pecuniary penalties for non-compliance of provisions relating to compulsory registration and provision of information, introduction of prize schemes for the general public and rewards to whistle blowers.
In order to plug compliance gaps arising out of the diversities of services tax tariff interpretations, descriptions of several taxable services along with classifications have been rationalised so that taxability issues in matching or comparative regimes may be resolved. Some statutory exemption threshold criteria have been rationalized to forestall escape from tax liabilities in case of services which have traditionally remained out of tax net and are still reluctant to start compliance.
The Punjab government has also decided to abolish Education Cess on clubs to prevent hardships to such clubs. In an effort to increase the own-source revenues of the province, a co-ordinated effort has been initiated to reform the existing taxation regime. Although the provincial tax collection has improved from 0.4% of GDP in FY11 to 0.7 % in FY14, it still remains weak despite enhanced fiscal empowerment.
In order to gear up the efforts for efficient tax collection, a Tax Reform Unit has been established in Finance Department which will be fully operational in the FY 2015-16. For FY 2015- 16, total receipts have been estimated at Rs 1,144,558.319 million. The Provincial Consolidated Fund has been pitched at Rs 1,447,241.814 million for FY 2015-16, as compared to Rs 1,349,404.205 million for FY 2014-15. The increase in estimates of General Revenue Receipts for FY 2015-16 is mainly attributed to expected increase of 11.8% in the receipts from the Federal Divisible Pool. Federal Divisible Pool share receipt is the major source of revenue for the Provincial Government, with a share of around 78%. The tax collection by the government during FY 2015-16 is estimated at Rs 160,591.110 million, as compared to FY 2014-15 of Rs 114,249.691 million. The Current Revenue Expenditure for FY 2015-16 has been estimated to be at Rs 753,010.825 million against last year''''''''s allocation of Rs 699,951.083 million. The Punjab government is also taking measures to improve its receipts by eradicating problems in tax collection and expansion net. The government is computerising tax record and collection system.
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