Pakistan Approves Framework for Uniform Sales Tax

The National Finance Commission (NFC) Monitoring Committee on Thursday approved the National Tax Council (NTC) composition and its terms of references (ToRs) with representations from provinces, which will enable them to decide collectively the rate for sales tax for both goods and services and harmonized tax structure.

Adviser to the Prime Minister on Finance and Revenue Dr.Abdul Hafeez Shaikh chaired the meeting of the NFC Monitoring Committee here on Thursday. Provincial Finance Ministers of Khyber Pakhtunkhwa and Balochistan were also there while Punjab and Sindh were represented by their Finance Secretaries.

The meeting was convened to seek approval of the bi-annual report on the implementation of the NFC Award for the periods of July –December 2018 and January – June 2019 and the establishment of the National Tax Council (NTC).

During the meeting suggestion were presented for sales tax harmonization in Pakistan. Pursuant to the decision of CCI dated 24th November 2017, the framing of ToRs of the Fiscal Coordination Committee (FCC) was assigned to the NFC Monitoring Committee.

The said ToRs were framed and approved in meeting. The terms of reference state the FCC shall review and discuss the fiscal policy issues of the federal and provincial governments and suggest solutions.

It will monitor current and development expenditures of the federal and provincial governments. The discussion on issues related to FBR receipts will also fall under the ambit of this committee.

The review of debt stock of the federal and provincial governments in the perspective of FRDL Act, discussion on the position of provinces’ own receipts and suggestion of measures for enhancement of provincial revenues and the review of cash balances of the federal and provincial governments are also assigned to the Committee.

The composition of NTC and its proposed ToRs were approved in the meeting. The provinces are represented in the NTC and it will enable them to decide collectively the rate for sales tax for both goods and services. It was proposed during the meeting that the NTC will meet at least once in every quarter and the recommendations of the NTC will be expressed in terms of majority and will be placed before NFC Monitoring Committee.

The reports which were approved by the NFC monitoring Committee would be presented in the National and Provincial Assemblies under the requirements of the Article 160 (3B) of the Constitution.

The bi-annual reports contain the information on Distribution of Revenues and Grants in Aid to the provinces under NFC Award announced in 2010 (7th NFC Award). The report also contained input from the provinces. The reports were endorsed by the provinces.

The Bi-Annual Report of Period July- December (FY 2018-19) stated that out of FBR’s divisible pool collection of Rs. 1949.752 billion, Rs. 1121.207 billion was the provincial share.

Punjab had Rs 580.061 billion, Sindh Rs. 275.232 billion, KP Rs. 163.906 billion, Balochistan got Rs. 101.909 billion. In addition to these transfers, KPK received 1% as war on terror fund of Rs. 19.694 billion, Balochistan additionally got Rs. 10.149 billion and Sindh OZT grant Rs. 7.399 billion. Straight transfers for the period were Rs.48.225 billion.

In addition to the divisible pool funds, Rs. 19.708 billion were given to KPK for WoT, Balcohistan additionally received Rs. 10.079 billion and Sindh got OZT grant of Rs. 7.404 billion.

Straight transfers of Rs. 46.826 billion were also made to the provinces during the period under four heads of royalty on crude oil, royalty on natural gas, gas development surcharge and excise duty on Natural Gas.