Law and Justice Division repeatedly conveyed to the Federal Board of Revenue (FBR) that the FBR is legally not empowered to collect Federal Excise Duty (FED) on services as it is the right of the provinces. The issue of FED on services came under discussion during the Senate Standing Committee on Finance here on Thursday.
When committee members asked about the legal and constitutional position, Legislative Advisor of the Law and Justice Division informed the committee that it has time and again conveyed to the tax authorities about the legal status of the collection of FED on services. The FED on services is the right of the provinces and FBR cannot collect the said duty.
Responding to this, senior FBR officials informed that the FBR can collect the FED on goods as well as on services. However, the matter is sub judice before the courts. Officials of the Ministry of Finance endorsed the viewpoint of the FBR during the committee proceedings.
Committee members said that the provinces are already collecting sales tax on services and collection of the FED on services by the FBR would create confusion among the provinces. It is worth mentioning that the federal excise duty @ 16 percent has been imposed on all financial services as specified in PCT Heading 98.13, whether rendered or provided by banking companies, non-banking financial institutions and other persons. For this purpose, S. No 8 of Table II of the First Schedule to the Federal Excise Act, 2005 has been substituted. Now financial services such as "Easy Paisa", private modarabas, asset management companies, foreign exchange dealers, ATM withdrawal fee, etc shall be subjected to federal excise duty.
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