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

They said the first target set for the NTC was an agreement on the common definition of “goods” and “services”. However, no one had an exact idea about the ultimate fate of the whole working if the constitution of the council was challenged in the court of law, they added.

Sources pointed out that the NTC had been modeled on the pattern of the GST Council in India.

In India, the GST Council was created under article 279-A of the constitution on September 12, 2016. Strangely enough, no such legal cover was available to the NTC in Pakistan.

It might be noted that the World Bank’s meddling in the Finance Division had been instrumental in bringing all the warring factions to the negotiation table.

A National Tax Council and an Executive Committee of the NTC have been constituted by the federal government obviously in order to wriggle out of the unpleasant situation.

Sources are of the view that the donors had 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 was heading towards a remote solution, and the biggest and the untapped businesses and consultants were the beneficiaries of this uncertainty, as they were all set to thrive at the cost of national unity.

Meanwhile, they said the tax intelligentsia was also keeping mum on the issue despite the fact that this was a greater national debate on the harmonization of taxes.

Sources said there was a strong disagreement between the Federal Board of Revenue (FBR) and the provincial tax administrations as the FBR had 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, had come up with a counter move of 5% tax rate if the payment was made through a 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.

FBR interprets that since these sectors dealt primarily in goods therefore provinces were 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 rewriting of the Constitution and the 18th Amendment.

Copyright Business Recorder, 2021