Additional Secretary Revenue Division Shahid Rahim Sheikh has said that the Federal government or Federal Board of Revenue (FBR) are legally empowered to reduce tax rates or grant general/special exemptions under the Sales Tax Act, 1990, Customs Act, 1969, Income Tax Ordinance 2001 and Federal Excise Act 2005 without prior approval of the Parliament.
Senior most official of the Pakistan Customs Group informed the Public Accounts Committee (PAC) here on Wednesday that the federal government and the Federal Board of Revenue (FBR) are not legally authorised to enhance the statutory rate of customs duty. However, the FBR can reduce the customs duty under section 19 and section 20 of the Customs Act 1990. In specific cases, the federal government or the FBR can grant general or specific exemption. However, the authorities have to record the reasons for grating such exemptions.
Additional Secretary Revenue Division further explained that under the Constitution the basic authority for taxation is the Parliament which can impose any tax on goods, services and income etc. The FBR administers four federal laws ie Sales Tax Act, 1990, Customs Act, 1969, Income Tax Ordinance 2001 and Federal Excise Act 2005. These laws are formed under the Constitution of Pakistan. In each enactment, there are provisions that the tax could be reduced or exempted by the federal government or FBR. The federal government can grant tax concessions or exemptions. The Prime Minister or Federal Minister is the competent authorities under the federal government for granting such exemptions. In case of FBR, Chairman FBR or its Member are the relevant authorities for granting exemptions at the Board's level. Similarly, there are well defined powers of the FBR to grant general or specific exemptions. For example, the FBR can grant exemption to a charitable institution through a statuary regulatory order (SRO) or special order after obtaining approval of the Ministry of Finance. The FBR has also granted exemption in special circumstances of floods or earthquake in the country. The FBR's powers are solely exercised by the Board for extending such general or specific exemptions. In case of FBR, the SRO is the instrument to allow such exemptions admissible under the Sales Tax Act, 1990, Customs Act, 1969, Income Tax Ordinance 2001 and Federal Excise Act 2005. Shahid Rahim Sheikh further stated that the FBR can grant such exemptions under the special circumstances admissible under the tax laws.
FBR Member Legal Aqil Usman endorsed the viewpoint of Additional Secretary Revenue Division that the FBR cannot impose any tax, but it can reduce the tax as available under all four tax laws. Chairman PAC Nadeem Afzal Gondal directed the Auditor General of Pakistan to give a presentation on the legal status under the Constitution for granting exemptions. Whether the Constitution allows the FBR to give such tax concessions? The AGP Office should also inform whether the FBR is legally empowered to grant exemptions to reduce tax rates under the federal tax laws without obtaining approval of the Parliament, he added.