LAHORE: Provincial revenue authorities are competent to impose sales tax on services on income arising from listing fee and exchange operation earned by the members of stock exchange, said sources.

According to details, some members of stock exchange had challenged such a demand of provincial revenue authorities on the pretext that these revenue authorities could not influence or exert their authority since they were created in pursuance of subjects enumerated in fourth schedule to the constitution having federal legislative domain.

However, the provincial revenue authorities contested the viewpoint by maintaining that taxes on income, sales tax on purchase and sales of goods, duties of customs and excuse etc., fall in the domain of federation.

But the federal legislature has no power to legislate in respect of sales tax on services even regarding those subject matters which are enumerated in federal legislative list to the constitution, as it shifts taxing power from the federation to the provinces while recognizing scope and extent of powers and creates a reconciled balance, which allows federation and provinces to operate in their own fields in harmony.

Sources in provincial revenue authorities said the listing fee is not charged from members, rather it is paid by companies which intend to list their securities to be traded on a security exchange. Once the fee is paid, the security appears on the electronic and online system of trading of the stock exchange, which was not possible before such listing.

Therefore, they said, stock exchange provides a very specific service of display of securities on its system so that these securities are offered for trading on payment of listing fee, which falls under the ambit of provincial revenue authorities as an economic activity.

Similarly, they added, those registered with a stock exchange as a member are allowed to act as a license to earn, as they are allowed to transaction sale purchase of securities not only in their own behalf but also on behalf of general public. In result of this activity, they earn income from commission, besides benefits from sales of securities, said the sources.

Copyright Business Recorder, 2024