Following a tug of war between all provincial taxation authorities over revenue collection, taxpayers are being forced through multiple tax-compliance notices for double taxation. In a letter forwarded to all four provincial revenue authorities, the Karachi Tax Bar Association (KTBA) said that service providers, who were based in Sindh and registered with the Sindh Revenue Board (SRB), were receiving notices from the Punjab Revenue Authority (PRA) and KPK Revenue Authority.
The notices are being issued by the PRA and KPK to the Sindh-based service providers on the premise that some of their services are being terminated in the provinces of Punjab or KPK. The services which are generally exposed to taxation at multiple jurisdictions are franchise, transport, commission and services provided by custom/clearing agents, container terminals, port operators, asset management companies, etc.
It said that there was a divergence of views amongst the provincial sales tax authorities whether the basis of taxation should be 'origin' or 'destination' of services and added that the same hit most of the services, which originated in one province and terminated in another. "Although all the provincial laws have effectively taxed all services on the basis of 'origination' as well as on 'termination' of service practically, PRA has effectively enforced the levy on consumption basis in different sectors."
The letter said that this anomaly in law had created difficulty for taxpayers, who had no option but to move courts for resolution. Moreover, it said the KTBA was of the view that provinces should resolve their differences on rights of taxability amongst themselves, in cases, where a service originated in one province and consumed in another province so that the compliant taxpayers were not suffered.
"Article 141 of the Constitution of Pakistan limits a Provincial Assembly's legislative competence to its province only. Similarly, Article 137 of the Constitution further restricts the executive authority of a province to those matters with respect to which a provincial assembly has power to make laws. It is submitted that the federal government had been mandated under the Punjab/KPK/ Balochistan Sales Tax laws to resolve any inter-provincial disputes in relation to sales tax. Therefore, KTBA urged the Federal Board of Revenue to co-ordinate with the provincial sales tax authorities for convincing them to withdraw all notices issued to the service providers who were being taxed in multiple jurisdictions on a single service.
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