Sindh has decided to take up the issue of Section-4 "Application of principles of origin and reverse charge in certain situations" of Punjab Sales Tax on Services Act, 2012 with Federal government, Business Recorder learnt here on Wednesday.
The Punjab Assembly had approved Punjab Sales Tax on Services Act, 2012 a few days back in which it was stated in Section 4-Application of principles of origin and reverse charge in certain situations: that (1) Where a person is providing taxable services in a province other than the Punjab but the recipient of such services is resident of the Punjab or is otherwise availing such services in the Punjab and has charged tax accordingly, the person providing such services shall pay the amount of tax so charged to the government.
The same section further stated that (2) Where the recipient of a taxable service is a person registered under the Act, he shall deduct the whole amount of tax in respect of the service received and pay the same with the government.
(3) Where a person is providing taxable services in more than one province or territory in Pakistan including the Punjab, such person shall be liable to pay tax to the government to the extent the tax is charged from a person resident in the Punjab or from a person who is otherwise availing such services in the Punjab.
(4) Where rendering of a taxable service originates from the Punjab but terminates outside Pakistan, such person shall be required to pay tax on such service to the government.
(5) Where a taxable service originates from outside Pakistan but is received or terminates in the Punjab, the recipient of such service shall be liable to pay the tax to the government.
(6) The persons who are required to pay the tax to the government in terms of subsections (1), (2), (3), (4) and (5) shall be liable to registration for purposes of this Act and the rules, sources said while quoting the Punjab sales at on services act 2012.
Informed sources said that the legal experts of Sindh Revenue Board (SRB) are closely studying the acts of PRA and it was pointed out that Punjab has illegally mentioned in Section 4- of its sales tax on services act that "Application of principles of origin and reverse charge in certain situations" that (1) Where a person is providing taxable services in a province other than the Punjab but the recipient of such services is resident of the Punjab or is otherwise availing such services in the Punjab and has charged tax accordingly, the person providing such services shall pay the amount of tax so charged to the government.
SRB has informed the hi-ups of Sindh government about this kind of new but controversial development made by Punjab in its sales tax act, a high level official told Business Recorder. However, in Sindh Sales Tax on Services Act 2011, mentioned definition of 'resident" is: An individual shall be a resident for a financial year, if the individual's place of business or his permanent address as listed in individual's National Identity Card, in Sindh or it has a place of business in Sindh or the control or management of the affairs of the association of persons is situated wholly or almost wholly in Sindh at any time during the relevant financial years: A company shall be resident for financial year if its registered office is in Sindh or it has a place of business in Sindh or the control or management of the affairs of the association of persons is situated wholly or almost wholly in Sindh at any time during the relevant financial years.
Sources said that SRB officials have informed Chief Minister Syed Qaim Ali Shah, Finance Minister Murad Ali Shah, Chief Secretary Raja Mohammad Abbas and others about this. One of the high level officials of SRB also telephoned one of the key post holders of Punjab government and expressed Sindh's reservation on Section 4 of Punjab sales tax on services act 2012, they said.
Sources claimed that Sindh would take-up this issue with hi-ups of Federal Government very soon. This decision was taken by the high authorities of province in a meeting held at Chief Secretary Office a few days back.
They said that a large number of individuals and companies rendering services in Sindh belong to Punjab province so that with implementation of Punjab's own sales tax on services act from July of new Fiscal Year, the service providers would face confusion regarding the payment of sales tax on services. It may be noted here that with passage of 18th constitutional amendment and seventh NFC award, provinces got the right of collection of sales tax on services. Sindh had established SRB for this purpose which started its work from July 2011. However, rest of three provinces had authorized FBR to continue the collection of sales tax on services in the mode of Federal Excise Duty (FED). Now, Punjab has established PRA for the collection of sales tax on services and legislated the sales tax on services act as well. The PRA would start its work from July 2012. Khyber Pakhtunkhawa and Balochistan have not established their own provincial sales tax collection bodies yet.
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