LAHORE: The National Tax Council (NTC) lacks the constitutional cover like the General Sales Tax (GST) Council in India; therefore, the status of NTC is not more than a discussion forum, said sources from the provincial tax administration.

They said the first target set for the NTC is an agreement on the common definition of ‘Goods’ and ‘Service’. However, no one has exact idea about the ultimate fate of the whole working if the constitution of the council is challenged in the court of law, they added.

The sources pointed out that the NTC has been modelled on the pattern of GST Council in India. In India, the GST Council was created under Article 279-A of the Constitution on 12th September 2016. Strangely enough, no such legal cover is available to NTC in Pakistan.

It may be noted that the World Bank’s meddling in the Finance Division has been instrumental in bringing all the warring factions to the negotiation table. A National Tax Council and an Executive Committee of the NTC has been constituted by the federal government obviously in order to wriggle out of the unpleasant situation.

The sources are of the view that the donors have also started raising eyebrows while sensing the imbroglio engulfing the whole fabric of the already weak tax system in the country.

According to well-placed sources, the situation is heading towards a remote solution and the biggest the untapped businesses and consultants are the beneficiaries of this uncertainty as they are all set to thrive at the cost of national disunity. Meanwhile, they said, the tax intelligentsia is also keeping mum on the issue despite the fact that this is a greater national debate on the harmonization of taxes. The sources said there is a strong disagreement between the Federal Board of Revenue (FBR) and provincial tax administrations as the FBR has set its own definition of restaurant service and lowered the rate of tax to 7.5% in order to offer that as bait to the restaurant owners. On the other hand, the provinces, especially Punjab, have come up with a counter move of 5% tax rate if the payment is made through debit or credit card.

Similarly, a series of litigation was also witnessed in Khyber Pakhtunkhwa when the FBR continued with unprecedented tirade of judicial interpretations and legislative interventions. Interestingly, one of the pre-18th Amendment judgments of the Peshawar High Court had apparently favoured the FBR. Similarly, jurisdictional overlaps had also surfaced in the service sectors of construction, toll manufacturing, transportation of oil and fashion designers, etc.

The FBR interprets that since these sectors deal primarily in goods therefore provinces are not competent to legislate upon these areas in the light of entry 49 of the 4th Schedule to the Constitution of 1973. This is something like a rewriting of the Constitution and 18th Amendment.

Copyright Business Recorder, 2021