Sindh has asked the federal government to resolve the issue of Reformed General Sales Tax (GST) because it urgently needs resources for revamping the damaged infrastructure, said Advisor to Chief Minister Dr Kaiser Bengali.
Talking to a group of media, Kaiser Bengali said that Sindh Chief Minister Syed Qaim Ali Shah raised this issue during the Council of Common Interest (CCI) meeting upon which Prime Minister Syed Yousuf Raza Gilani issued directives to the Finance Minister in this regard.
He said that all the technical modalities with respect to 'reformed GST' have been finalised some three months ago. The advisor to Chief Minister said that it was agreed during the technical level meetings that Federal Board of Revenue (FBR) would give input adjustment on all the services including telecommunication while provinces would be responsible for revenue collection.
The calculation of input adjustment on finance, construction, franchises and advertising was difficult, therefore, it was decided that federal government would collect sales tax on these four services and poll it separately from where it would be distributed as per National Finance Commission formula.
Kaiser Bengali said each province wanted that amount collected on these services should be distributed through the formula that benefits them the most. Punjab wanted distribution of sales tax on services on the basis of population while Sindh wanted it on the basis of revenue and Khyber Pakhtunkhwa and Balochistan wanted that the formula of final share of the NFC should be adopted for distribution of reformed GST on services' collection, he added. However, he said the differences among the provinces have been amicably resolved after federal government said it would bear the loss in case of any distribution formula.
Kaiser Bengali said that these technical modalities have been finalised and now the federal government was required to convene a meeting to take the decision. Finance Minister in his budget speech had announced that the reformed GST would be introduced from October 1, 2010. Sindh government had written two letters to the federal government requesting a meeting to resolve the issue at political level.
Sindh government has repeatedly stated that it would not give up its constitutional right to collect GST on services. However, the high-ups of federal government have argued in favour of uniform reformed GST implementation with one collecting authority at federal level to avoid complications.
It is important to mention that if the government intends to introduce reformed GST from October 1, the Federal Board of Revenue (FBR) has to immediately start the consultative process on the issue. So far no consultative process has been started with the stakeholders on the draft of the reformed GST. Without consultation, it is not possible for the government to implement the reformed GST in coming 1-2 weeks' period.