Input tax adjustment: AJK reluctant to extend facility to SNGPL, mobile phone companies

The government of Azad Jammu and Kashmir (AJK) is not ready to extend the facility of input tax adjustment to the natural gas suppliers and mobile phone companies paying sales tax in Pakistan.
Sources told Business Recorder on Sunday the Central Board of Revenue (CBR) has asked the AJK tax authorities to give input tax adjustment to the mobile phone companies and natural gas suppliers in their jurisdictional territory. The AJK government has adopted the entire Sales Tax Act and implemented the same in their territory, they said, adding the AJK sales tax laws, which is a copy of the Sales Tax Act, 1990, have been enforced without giving ''input tax adjustment'' facility to these companies paying sales tax on inputs/supplies in Pakistan.
"The adjustment of input tax is available to the taxpayers in Pakistan then why the same is not available to the investors/suppliers in AJK", officials questioned.
The CBR raised issue of ''input tax adjustment'' deposited by the Sui Northern Gas Pipelines Limited (SNGPL) in Pakistan at the time of receiving supply of natural gas from the producers/suppliers.
Since the SNGPL pays 15 percent sales tax to the CBR on supplies of natural gas received from the producers in Pakistan, the AJK tax authorities should not ask the SNGPL to again pay sales tax on the supply of gas made in the AJK territory. Under this arrangement, the SNGPL has to pay double tax.
Sources said the AJK tax authorities have refused to accept the CBR stance on the basis of their own tax laws. The Mirpur Central Excise and Sales Tax Collector was of the view that AJK is an independent territory under the AJK Interim Constitution Act, 1974 and that the AJK Board of Revenue under the AJK Sales Tax (Adoption) Act, 1993, is empowered to levy sales tax on taxable supplies in the AJK territory.
Therefore, the taxable supplies of natural gas made in the AJK territory should not be taxed and the CBR should not demand the SNGPL to pay sales tax on their supplies made in AJK territory and let the AJK Board of Revenue collect the sales tax, which could be adjusted by the SNGPL through the sales tax to be collected from the consumers in AJK.
Responding to the issue, the AJK Council Secretary has informed the CBR that measures should be taken to avoid double taxation on supplies of SNGPL made in the territory of AJK and suggested that the CBR should concede to the point of view of the AJK government regarding its right of collection of input tax from SNGPL on their supplies made in the AJK territory and that the CBR should consider waiving off input tax to the extent of supplies of gas made in the AJK territory enabling the AJK Board of Revenue to collect the same from the SNGPL and to allow them adjustment thereof through output tax payable by consumers.
On the other hand, the CBR opined that the issue mainly relates to the ''input tax adjustment''. If all provisions of the Sales Tax Act have been incorporated by the AJK tax authorities, then the provision of adjustment be incorporated in their law.