Yet another apple of discord is said to be reaped between the Federal Board of Revenue (FBR) and Sindh Revenue Board (SRB) over the collection of sales tax on advertisements. According to sources, the FBR has taken a firm stand not to allow registered persons under Sales Tax Act 1990 to withhold and deposit the sum of input tax on advertisement services at provincial kitty.
On the other hand, the SRB forcefully contends that under the seventh NFC Award and Constitution of Pakistan, it has a right to collect sales tax on advertisement services rendered or consumed in Sindh. This friction between the two revenue authorities has virtually brought business community into a halt and widespread fiasco.
When contacted, Adnan Mufti FCA, member ICAP Taxation Committee confirmed that FBR has issued its clarification dated December 30, 2011, whereby it has disputed SRB's contention regarding withholding and deposit of advertisement related sales tax with the provincial tax authority. He said FBR had also directed its field formations to take up the issue and ensure strict compliance of sales tax withholding on advertisement services in terms of Sales Tax Special Procedure (Withholding) Rules 2007.
On the contrary, vide Circular No IV dated November 21, 2011 read with Circular 2 of 2012 dated March 5, 2012, the SRB holds the view that Sales Tax Special Procedure (Withholding) Rules 2007 are no longer applicable in respect of the Sindh Sales Tax Services, because the Sindh government has not authorised the FBR to administer, regulate, collect or receive the Sindh Sales Tax levied under the Sindh Sales Tax of Services Act 2011, he added. In line with such a contention, the SRB has directed the taxpayers to withhold and pay sales tax to SRB but claim associated input tax credit from FBR, Mufti said.
Replying to a question, he opined that legal protection is available to input tax adjustment/refund under Section 7(1) of the Sales Tax Act 1990 read with section 2(14)(d) thereof which provides admissibility of input tax credit/adjustment of the provincial (including Sindh) sales tax on services against the output tax payable by the FBR registered person.
Despite having such legal touchstone, how can FBR reject taxpayers input tax credit on advertisement services rendered or consumed in Sindh, he said and urged both authorities for bilateral arrangements to preclude infringement of taxpayers' legal and vested rights.
He was of the view that the conflict between FBR and SRB appeared to be predicament for the businessmen, who might be caught by either side for non compliance of tax laws. He feared that if the disputes between both the revenue collecting agencies over franchise, advertisements and restaurants services are not resolved in near future, such matters would soon land up in a court of law.
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