Federal government and provinces on Saturday failed to evolve consensus on the imposition of federal excise duty in value added tax (VAT) mode on service providers.
Sources said a meeting was held at the Ministry of Finance on Saturday to develop consensus among federal government and provinces for imposition of federal excise duty on services in the budget 2009-10 as well as allowing federal tax authorities to collect that duty on behalf of the provinces. The meeting was attended by finance secretaries of all the four provinces.
Balochistan and North West Frontier Province (NWFP) were of the view that imposition of duty on services would be a harsh decision owing to prevailing political conditions in their provinces. On the other hand, Punjab and Sindh expressed willingness with a condition that the duty should be imposed on services, however, its collection rights be given to all provinces instead of federal tax authorities, added the official.
The meeting also discussed the issue of collection of duty on services especially in NWFP and Balochistan where tax collection machinery does not have the capacity to enforce and collect this duty. Sources said that the finance ministry would now take up the issue with political leadership to evolve consensus so that revenue generation could be enhanced in the next fiscal year for meeting the development requirements of the provinces.
The ministry of finance has already announced to broaden the revenue generation by bringing at least two new sectors in the tax net and services sector is one of them to be taxed to bridge the galloping revenue and expenditures gap. Disagreement by the provinces over this issue would certainly be troubling for the economic managers.