The National Finance Commission (NFC) Technical Standing Committee on Reformed General Sales Tax (RGST) on services was unable to reach consensus on provincial legislation pertaining to RGST on services.
Sources told Business Recorder here on Friday that NFC Technical Standing Committee on RGST on services concluded final round of negotiations for identification of services on which sales tax collection would be allowed to the provinces/federation.
However, the meeting concluded without any agreement between the provinces and the federation on the issue of input tax adjustment on major services. The government had constituted the NFC Technical Standing Committee on the RGST to examine each of the services against the agreed benchmark and mutually decide the issue. However, there are still differences on the issues of input tax adjustment on certain services.
The Technical Standing Committee of the National Finance Commission, chaired by Secretary Finance Salman Siddique, met at FBR House to finalise the list of services to be transferred to the provinces and services to be handed over to the FBR for the purpose of collection. Technical Standing Committee of the NFC was supposed to finalise its recommendations by October 15, 2010 so that the draft legislation on Reformed GST by the federal and provincial governments could be ready for presentation in the national assembly and four provincial assemblies by October 22, 2010.
It is learnt that the issue mainly related to the retention of services like shipping agents, customs agents and stevedores and ship chandelles as these services relate to the imports and exports activities in Karachi. However, till the end of the meeting, the dispute could not be resolved among the provinces for retention of these services by the provinces or federation. One of the options is to allow the FBR to collect sales tax on services like shipping agents, customs agents and stevedores and ship chandelles, but the same has not been agreed by the committee members.
The issue also came to the light as to which province would be entitled to the amount of tax to be collected by a customs agent having licence from Lahore and providing services at Karachi. Punjab''s all major industries make their imports from Karachi and customs agents having licences issued from Lahore provide them customs clearing services at Karachi; so the tax paid on such services should be transferred to the province of Punjab. In case of Sindh, RGST collected on customs services at Karachi would be the right of Province of Sindh.
As per ''Record Note'' on the implementation of the reformed GST, the technical committee, to be chaired by Federal Finance Secretary, shall examine each of the services against the agreed benchmark and mutually decide accordingly. The committee shall function as a standing committee and would submit its first report by October 15, 2010 to enable the provinces to draft their respective Laws. The entire exercise of drafting of federal and provincial laws shall be completed by October 22, 2010.
Despite the fact that the deadline of October 15 to mutually decide about the services has passed, the NFC Technical Standing Committee on the RGST on services failed to reach consensus on the issue of input tax adjustment on major services. The concluding meeting also discussed the issue of services in view of Record Note on the implementation of the reformed GST as agreed between the provinces. The meeting identified around six services as ''stand-alone services'' where no input tax adjustment is involved for transfer to the provinces. The services included services provided by specialist doctors, engineers, hotels, marriage halls, beauty clinics and land developers.
So far, the meeting could not finalise the authority responsible for collecting RGST on ten services where input adjustment is involved. These services include services provided by the stock brokers, commission agents, underwriters, credit rating agencies, auditors and accountants, clearing and forwarding agents, stevedores, shipping agents, customs agents and courier services.
The committee members tried to convince the province of Sindh to agree on allowing FBR the responsibility of collection of RGST on the said 10 major services. Sources said that at present some 100 services are under consideration by the authorities and all those services, which would not be given to federal government, would be handed over to the provinces for imposition and collection of RGST from the date of its enforcement.
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