Sindh has assured the federal government to implement value-added tax (VAT) on services in line with the requirements of Finance Ministry, but would not give up its right of collection, Business Recorder has learnt. Sources said that Sindh has prepared its own proposals to collect VAT on services, meeting the requirements of the Finance Ministry as per its commitment with International Monetary Fund (IMF).
The proposal was handed over to Sindh Chief Minister Qaim Ali Shah, who came to Islamabad to attend the review meeting on implementation status of Energy Summit decisions. They said that no meeting has been scheduled on the issue in near future. The Sindh government would wait for the response of the federation to its proposals.
Sources said that Sindh government, during talks with Ministry of Finance, remained firm on its stance to collect sale tax on services. Thus provinces were given the option under the new NFC award to collect sales tax on services - an option that Sindh insists on while the other provinces have agreed to allow the FBR to collect it on their behalf on payment of a one percent fee. The reason for Sindh's insistence is largely based on its concern that the tax so collected would become part of the divisible pool and allocated on the basis of the NFC award.
The VAT on services is a provincial issue, but there was an understanding that Federal Board of Revenue (FBR) would collect the tax on behalf of provinces and would return them after charging one percent collection fee. The reason for this understanding was that only integrated application of VAT could be feasible. The IMF has delayed Board meetings, without whose approval the subsequent tranche cannot be released, till the certification by Pakistan that VAT would be implemented in a broad-based integrated form as drafted by the FBR.
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