17pc GST on imports, supplies: Hospitals run by NPOs give presentation to Tarin

ISLAMABAD: The imposition of 17 percent sales tax on imports and local supplies of Non-Profit Organizations (NPOs), running hospitals, has direct consequences on healthcare programmes for poor people of Pakistan.

According to a joint presentation of the NPOs hospitals to Finance Minister Shaukat Tarin Wednesday, through Finance (Supplementary) Act, 2022, there are certain amendments made, inter alia, in the Sales Tax Law, in relation to Non Profit Organizations [NPOs], which [more particularly] include withdrawal of Clause 52A from Table 1 of Sixth Schedule to the Sales Tax Act, 1990, which has amplified the financial and compliance strains, in an immense measure, on the NPOs, whose philanthropic endeavours are stirred and steered by empathy and who are, notwithstanding the enormity of numerous and frequent challenges, extending resolute healthcare facilities, to the beleaguered, longsuffering, oppressed, susceptible, deprived, lower middle class and middle class segments of the Society, free of cost or at concessional and subsidised rates.

The omission of clause 52A of Table 1 of Sixth Schedule to the Sales Tax Act, 1990 has rendered all the supplies to NPOs taxable [chargeable to sales tax] and thus, the suppliers have started charging sales tax at 17 percent to NPOs which obviously is an enormous financial affliction for the NPOs, who are already walking on tight tope and incessantly making rigorous and persistent efforts, to balance their healthcare welfare initiatives against the scarce pecuniary resources, at their disposal.

The imposition of aforesaid 17 percent sales tax would also discourage the NPOs, from embarking upon, initiatives for welfare projects, aimed at intensifying their current welfare healthcare programs and facilities.

They said that the omission of sales tax exemptions contained in various clauses in the table 3 of the Sixth Schedule to the Sales Tax Act, 1990 has resulted in imposition of sales tax upon import stage, on import of medical and surgical equipment, apparatuses, devices and soon and in the direct consequence thereof the NPOs are made to endure the enormous adverse financial brunt and in the direct consequence thereof, they would be discouraged from initiating healthcare [Balancing, Modernization and Replacement] BMR programs.

Owing to withdrawal of Clause 52A from Table 1 of Sixth Schedule to the Sales Tax Act, 1990, in addition to the foregoing financial burden, the NPOs are now being subjected to three percent further sales tax and five percent withholding sales tax, on account of respectively buyer and supplier, being not registered under the Sales Tax Law, they maintained.

The NPOs, before initiating imports processes, would henceforth, in addition to paying the sales tax, also be required to be registered under the Sales Tax Law, as Sales Tax Registered Person and all the NPOs would also need to be registered as sales tax withholding agent, which [compliance] obviously would be a needless additional disturbance and extra workload, for the NPOs.

It would be an enormous task for the NPOs, to identify from thousands of transactions, the transactions to which sales tax withholding provisions are attracted and the transactions, where such provisions would not apply, for they will have to constantly look at the third and sixth schedules to the Sales Tax Act, 1990 to ascertain the applicability or otherwise of the sales tax withholding provisions.

It is perched on the façade and goes without saying that keeping the afore-described framework and backdrop in sight, there could not have been [by any means] any intention, on the part of Federal Legislature, to introduce the aforesaid [financial and compliance] stresses and strains on NPOs and while making changes in the Sales TaxLaw through aforesaid Finance (Supplementary) Act, 2022, the adverse consequences, asto increase in afore-described burdens that the changes would result in, was some howoverlooked.

The government is requested to issue immediate instructions to FBR and others, to forthwith take necessary steps, to suspend the operation of the all the relevant provisions of the Law that have increased the afore-described financial and compliance burdens, introduced through recent Finance (Supplementary) Act, 2022 and forthwith revert back to pre-amendment position, using the administrative and legislative means, as are found appropriate.

The prime minister and finance minister are also requested, to use their good offices and ask the Provincial Governments also, to forthwith legislate exemption from sales tax on services provided to NPOs, matching the exemptions under aforesaid Clause 52A in Table 1 of Sixth Schedule to the Sales Tax Act, 1990, the restoration whereof is being requested herein, the joint presentation added.

Copyright Business Recorder, 2022