FBR advised to stop issuing revision in sales tax rates on petroleum products

FBR advised to stop issuing revision in sales tax rates on petroleum products

KARACHI: Federal Board of Revenue (FBR) has been advised to stop practice of issuing revision in sales tax on petroleum products on monthly basis.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020, presented suggestions regard powers to issue notifications for change in rate of sales tax – Section 3(2)(b) of Sales Tax Act, 1990.

According to the present law the federal government may, by notification in the official Gazette, declare higher or lower rates of sales tax in respect of any taxable goods, provided that the bill for such change has been passed by the Majlis-e-Shoora.

From 1 July 2016 to date, there have been around half a dozen notifications for changing the rates of sales tax on petroleum products.

The rates have varied from zero percent to 36.5 percent during this period.

The Supreme Court of Pakistan took a suo motu notice for a similar notification on June 21, 2013 and held that the federal government had no authority to levy and recover sales tax without getting the respective bill passed from the National Assembly.

Given the Supreme Court’s verdict on the subject matter, questions arise as to whether the frequent changes in the rates of sales tax for petroleum products are maintainable under law.

Moreover, so many changes on such frequent notice are in itself a challenge for industries which have to go through a lengthy systematic implementation process, each time such rates are notified.

Therefore, the OICCI recommended that that changes in sales tax rates are legally vetted by the Parliament and this monthly practice of issuing notifications at the government’s behest is abolished.

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