ISLAMABAD (July 13 2010): The Federal Board of Revenue has chalked out a new strategy for implementing reformed general sales tax (GST) and tasked the provinces to first submit their reformed sales tax on services collection plan so as to incorporate it in the final draft of the reformed GST. Sources told Business Recorder here on Monday that the mistakes of the past will not be repeated while finalising the reformed GST.
In case of the Federal and Provincial VAT Bills 2010, the VAT team drafted the law for collection of the VAT on goods and services without consulting the provinces. When some provinces rejected the proposed VAT laws, the idea to implement the broad-based integrated VAT was scrapped.
To avert such mistakes in future, the final draft of the reformed GST will be prepared after developing federating units' consensus on collection of sales tax on services. The provinces would be taken on board before issuing any draft containing the sales tax collection mechanism on services. The reformed GST law would not be released till an agreement has been reached between the federation and provinces. The failed experience of Federal and Provincial VAT Bills 2010 would have to be duly considered during the ongoing exercise of reformed GST.
In this regard, the FBR has submitted different options on collection of sales tax on services to the Ministry of Finance. The first option is that the provinces would authorise the FBR to collect sales tax on services. This is an ideal situation, which seemed to be impracticable in view of reservations of Sindh and Punjab.
The second option is to give collection rights of half services to the federation and remaining to the provinces. The third option is that the most potential services would remain within the purview of FBR and the provinces would be gradually empowered to collect sales tax on services.
Similarly, other options have been drafted based on assumptions that provinces would exercise the right to collect sales tax on services. The issue of input tax adjustment and tax credit among provinces has also been considered while drafting different options for collection of sales tax on services.
Once the provinces agree on a singular mechanism, the FBR will finalise the draft. The agreement between the federation and provinces would form basis for drafting the reformed GST law. However, the draft of the reformed GST would not be finalised unless or until the provinces clearly submit their proposals to be discussed in the coming meeting of the provincial finance secretaries, officials added.
-www.brecorder.com
In case of the Federal and Provincial VAT Bills 2010, the VAT team drafted the law for collection of the VAT on goods and services without consulting the provinces. When some provinces rejected the proposed VAT laws, the idea to implement the broad-based integrated VAT was scrapped.
To avert such mistakes in future, the final draft of the reformed GST will be prepared after developing federating units' consensus on collection of sales tax on services. The provinces would be taken on board before issuing any draft containing the sales tax collection mechanism on services. The reformed GST law would not be released till an agreement has been reached between the federation and provinces. The failed experience of Federal and Provincial VAT Bills 2010 would have to be duly considered during the ongoing exercise of reformed GST.
In this regard, the FBR has submitted different options on collection of sales tax on services to the Ministry of Finance. The first option is that the provinces would authorise the FBR to collect sales tax on services. This is an ideal situation, which seemed to be impracticable in view of reservations of Sindh and Punjab.
The second option is to give collection rights of half services to the federation and remaining to the provinces. The third option is that the most potential services would remain within the purview of FBR and the provinces would be gradually empowered to collect sales tax on services.
Similarly, other options have been drafted based on assumptions that provinces would exercise the right to collect sales tax on services. The issue of input tax adjustment and tax credit among provinces has also been considered while drafting different options for collection of sales tax on services.
Once the provinces agree on a singular mechanism, the FBR will finalise the draft. The agreement between the federation and provinces would form basis for drafting the reformed GST law. However, the draft of the reformed GST would not be finalised unless or until the provinces clearly submit their proposals to be discussed in the coming meeting of the provincial finance secretaries, officials added.
-www.brecorder.com
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