RECORDER REPORT

ISLAMABD: The federal government is unlikely to contain the revised fiscal deficit of 4.7 percent subsequent to the provinces indicating their inability to generate a budgetary surplus.

An official said the issue of budget surplus was discussed on Monday during the biannual meeting on implementation of National Finance Award (NFC) presided over by Finance Minister Dr Abdul Hafeez Sheikh. A report on the collection and distribution of taxes under the divisible pool for July-December 2011-12 was submitted at the meeting.

Another secretary-level meeting was also held chaired by Finance Secretary and attended by provincial finance secretaries. The meeting approved the first six-month (July-December) tax collection distributions between the center and provinces from the divisible pool.

An official of the Finance Ministry revealed that the provincial budget surplus has been revised downward to Rs 90 billion for the current fiscal year (from the budgeted Rs 125 billion). The official further revealed that the provinces conveyed to the federal government that they would be unable to show any surplus in case of a decrease in transfer from the divisible pool to them. He said that transfer to the provinces would largely depend on the ability of the FBR to achieve revenue collection target for the current fiscal year.

The FBR is still to collect Rs 568 billion in the remaining two months, a challenging prospect, to achieve Rs1952 billion projected total revenue collection for the current fiscal year. However, in just the first 11 days of May, revenue collections were Rs 39 billion at which rate the FBR is unlikely to achieve its target. Another official stated that the ongoing law and order situation in Sindh and the energy crisis is negatively impacting on economic activities which, in turn, are impacting on revenue collection.

Advisor to Ministry of Finance, Rana Asad Amin said Khyber Pakhtunkhawa has expressed reservations over the collection of GST on services in Karachi and stated that their province had not been taken into confidence about the system developed by the Sindh government for collection of GST on services.

He said that KP representatives’ major concern was that Sindh government started collecting services on all the three groups contrary to agreement reached that it would collect GST on services for Group-I. However, Sindh Finance Secretary stated that Sindh has been collecting sales tax on services within the province and has nothing to do with the other three provinces. It was agreed in the meeting that Sindh government would give a detailed presentation to the other three provinces on the software used for collection of sales tax on services. The meeting also agreed on the demand of other provinces that the Federal Board of Revenue would share data of sales tax collection on telecom.

Balochistan suggested that the GST on services should be on the same formula as that applied to GST goods. The proposal was opposed by the Sindh on the grounds that sales tax on goods is collected by the federal government under the constitution.

The Finance Secretary level meeting reached a consensus that Punjab government would pay Rs4 billion on account of electricity dues to Pepco and the latter would pay the former Rs3.1 billion as electricity duty on behalf of the province. Rana Asad Amin said that excepting Rs50 billion due from Sindh province, which is disputed in court, the issue of Pepco outstanding dues against other provinces were settled.