The Federal Board of Revenue (FBR) and the Sindh Revenue Board (SRB) have not yet finalised the basic issues and modalities for collection and disbursement of sales tax on services. Sources told Business Recorder here on Tuesday that the SRB has raised 14 disputed issues, which are expected to be discussed in the coming meeting between the FBR and the SRB at the FBR House on August 16, 2011.
In a latest letter to the FBR Chairman, the SRB has requested the FBR to convene a meeting for resolving pending issues with senior officers of FBR Inland Revenue Wing and Pakistan Revenue Automation Limited (PRAL). These 14 legal issues include withdrawal of the federal excise duty on services, duplication in filing of sales tax returns with the SRB as well as the FBR, reconciliation of data, input tax adjustment, treatment of taxpayers engaged in multiple activities and if the service is initiated in one province and completed in the other, how revenue would be bifurcated? Besides, other legal issues have also been pointed out by the SRB.
The letter of the SRB to the FBR reflects that even the basic issues pertaining to sales tax on services have yet not been resolved between the FBR and the SRB. The SRB has written a detailed letter to the FBR to highlight 14 legal issues including basic issue of tax adjustment to be resolved between the federal government and the provinces. The meeting between the SRB and the FBR on August 16, 2011 is expected to discuss these 14 issues at the FBR headquarters.
According to the letter of the SRB to the FBR, the SRB has raised the following legal issues: We (SRB) have requested for resolving pending issues and request again a meeting with FBR and PRAL senior officers to discuss and resolve, inter alia, pending issues. Firstly, this issue is related to the short transfers of revenue during the 2010-11 figure had to be supplied by the FBR to the Finance Division.
Secondly, the telecommunication companies are to be directed to transfer Sindh related sales tax collection to the SRB. Thirdly, the withdrawal of the FED on services, as a follow up of press release issued by the FBR. The Board has yet not withdrawn the FED on services under the Federal Excise Act despite issuance of a press release.
Fourthly, the response to the SRB letter whereby Group-III related to services collection authority is to be given to the FBR subject to the conditions. It is worth mentioning that the Group-III of the 'Record Note' agreed between the federation and provinces included services that constitute a significant proportion as inputs into other supplies or involve transactions across provinces, shall be delegated by the province to the FBR for collection.
Fifthly, where return of sales tax on service is filed with SRB with entire activities in Sindh, would FBR require filing of returns, because the registered persons were already registered with the FBR. Sixthly, if registered persons files return with the SRB, and also files return with the FBR for services provided in any of the three provinces or Islamabad Capital Territory (ICT), how the FBR would reconcile the figures with the PRAL? In this regard, the FBR has to issue a clarification on the reconciliation of figures.
Seventh, where the registered person is involved in multiple activities, a separate return for Sindh service would be filed, and for goods with the FBR, how the statistics would be reconciled by the FBR. Eight, how the FBR will conduct reconciliation of the sales tax and income tax returns/statements?
Ninthly, the FBR has to clarify the sales tax applicability on restaurants. In case of restaurant, sales tax/FED matters clarification is needed that where Sindh collects sales tax, the FBR may not levy FED or 50 percent of the bill be subjected to 16 percent Sindh sales tax, while maintaining exemption of Rs 3.6 million annual registration threshold of restaurants.
Tenth, the FBR has to clarify the issue pertaining to the input tax matter purchase of fixed assets by registered persons. How should Sindh verify and co-ordinate with the FBR to allow input tax claim? How much input credit be given by the SRB; should it be proportionate basis? Eleventh, the standard of evidence would be required based on which FBR is to give input adjustment of payment of service tax.
Twelve, if service is initiated in one province and completed in the other (except telecom based on origination basis), how would revenue be bifurcated? Thirteen, the FBR and the SRB may set up a clearing house cell to hold meeting every quarter to consider issues. Fourteen, the issue is related to the FBR's officer deputation to the SRB. In this regard, the SRB has already sent the request to the FBR, the letter added.