RGST bills: assemblies required to show urgency: IMF team expected on October 27

The federal government and provinces need to introduce Reformed GST Bills in their respective assemblies for legislation prior to arrival of International Monetary Fund (IMF) delegation on October 27 for initiation of talks on economic performance of the country, it is learnt.
Sources said that progress on RGST implementation is very critical benchmark for completion of review of the economy by the IMF. The government is optimistic, despite creeping differences among provinces on input tax adjustment/tax credit against sales tax on potential services, that centre and provinces would be able to complete the required legislation by October 22 for implementation of much delayed RGST.
"We are hopeful that draft law would be introduced in the National Assembly and Provincial Assemblies for approval to formally move towards a process to enforce RGST" said an official.
About fiscal deficit of the first quarter, he said that fiscal deficit has been 1.6 percent for July-September 2010 and it would be difficult to contain it from going beyond 6 percent for the outgoing fiscal year. The government has made a commitment with IIMF in the last Letter of Intent (LoI) that it would cap it at 4 percent of GDP before the impact of flood, he added.
The draft law of RGST would be different from the VAT because all exemptions might not be withdrawn. Sources said the IMF would be more than happy if the RGST is introduced through parliamentary legislation, instead of an Ordinance.
Consensus on sales tax collection on services was agreed by the federal and provincial governments during two-day talks last month. It was agreed that implementation of RGST on services was provincial subject and they could delegate powers to collect sale tax on services to the federal government if they desire so. The FBR would collect tax on their behalf and would return it to them after deducting 1 percent collection charges. Sindh has agreed to adopt legislation to give right of sale tax collection on banking, advertising, construction and franchise to the FBR, however, on telecommunication it would collect tax by itself.
Punjab would get 60.39 percent from the total collection of sale tax on services, Sindh 50 percent, KP 15.6 percent and Balochistan 10 percent that would make the total 136.01 percent. Additional 36.01 percent would be paid by the federal government. The implementation of RGST, according to FBR Chairman Sohail Ahmed, would be completed by December 2010. Exemptions to various sectors would also be withdrawn in the first phase. However, Punjab and Sindh princes have reportedly developed differences over input adjustment on certain services during the last two days meetings of Technical committee of RGST. The meetings of the committee were held at Federal Board Revenue.