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The Federal Board of Revenue (FBR) will further verify data and analyse proposal of single stage sales tax (SSST) at reduced rate in light of the input of the International Monetary Fund (IMF) experts. One of the participants of Pakistan's delegation, who held talks with the IMF at Dubai on SSST told Business Recorder that a detailed presentation has been given to the IMF on the SSST. FBR team of tax managers and two officials of Tax Reform Commission (TRC) held meeting with the IMF.
Fund experts raised queries about the idea and working behind the single stage sales tax and asked the FBR team to submit comprehensive working on the said proposal. Conceptually, experts of the IMF were in favour of the existing value added tax regime applicable in different countries as compared to the concept of the SSST. However, the FBR team had not gone to seek their permission on SSST. The FBR team went to meet the IMF experts to have their analytical viewpoint on the SSST to improve sales tax system in the country. Taking into account the viewpoint of experts, the FBR will further carry out research and analysis on the said proposal, official said.
Sources said that the government would fine-tune its proposal for single stage ST before upcoming budget 2016-17. In the US there is single stage GST at retail level. In Bangladesh and India there was fragmented GST by having mixture of VAT and single stage GST. In Pakistan, the VAT in its complete shape can never be developed as it took 20 years to UK for developing complete chain to place an effective GST in VAT mode. sources maintained.
It was discussed whether the proposal would have negative impact on revenue mobilisation efforts of the FBR. It was also pointed out that the existing GST mode is collected on the basis of value addition at every stage which is currently under implementation in most of the countries of the world, sources said. Pakistan's delegation led by Advisor to PM on Revenues Haroon Akhtar comprises Chairman FBR Nisar Mohammad Khan, Inland Revenue Service (IRS) officer Dr Iqbal, Chairman Tax Reform Commission Masood Naqvi and Member TRC Ashfaque Tola.
Pakistani delegation conducted very productive brain storming discussion with the IMF experts who asked the tax managers to further conduct working on the proposal. Fund experts reportedly also asked the FBR team to give rationale behind implementation of the said proposal and also submit comprehensive working on the same. Under the proposal finalised by Tax Reform Commission (TRC), it recommended single stage GST at maximum rate of 7 to 8 percent as final tax by abolishing existing sales tax rate of 17 percent at every stage of value addition.
Pakistan had introduced GST in shape of Value Added Tax (VAT) mode during the decade of 90s which was collected on the basis of value addition at different stages. Under the proposal the tax collected would be full and final liability and input tax adjustment would not be allowed.
One of the key recommendations of the TRC is that the federal and provincial sales tax authorities should form a fully empowered commission to bring harmony in the sales tax laws dealing with services. The report of the TRC said that there is a need to change the present system of sales tax which is not only cumbersome and difficult to comply but is full of leakages and abuse. Single stage, single digit non-adjustable sales tax (with provision to cater to special needs of exporters) is a strong way forward.

Copyright Business Recorder, 2015

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