The Federation and the Sindh government have not yet fully resolved the issue of collection of general sales tax (GST) on services. Dr Kaiser Bengali, Advisor to Sindh Chief Minister on Revenues told Business Recorder here on Wednesday that the Federation and the provinces had exchanged drafts of the proposed arrangement for collection of sales tax on services.
However, no final settlement has been made over the implementation of GST on services in the VAT mode. He clarified that the Finance Ministry does not disagree with the Constitutional stance of the Sindh government but they have to convert the proposal into a decision for implementation. "We have positive meetings with the Finance Ministry, but the agreed proposals have to be converted into the decision," Bengali added.
During the last interaction between the Finance Ministry and the Sindh Finance Department Sunday last, the only decision made was that the issue will be resolved soon and both sides reiterated that the reformed GST on services would be implemented across the country from October 2010. At the last moment, the officials of the Finance Ministry left for Washington to hold talks with the IMF and hence no final decision.
Dr Kaiser Bengali said that, "I have written two letters to the Finance Ministry whereas the Sindh Chief Minister has also written a letter to the Prime Minister, but no final agreement has been made on the issue," he said. Sindh has suggested that all the taxes on financial services, advertising, construction and franchises should be deposited in a pool and its distribution be made as per the NFC formula. However, Punjab is seeking distribution on the basis of population of each province whereas Balochistan and Khyber-Pakhtunkhwa have supported Sindh over the issue, but the final settlement has yet to be achieved.