ISLAMABAD: The federal government is planning to takeover right to collect sales tax on services from the provinces as it was felt the true potential of collection was not realized.
According to minutes of the meeting chaired by the prime minister to review proposed restructuring of Federal Board of Revenue (FBR) and domestic resource mobilization, held last month, it is discussed that revenue potential of General Sales Tax (Services) is not being fully realized owing to jurisdiction issues between FBR and provincial revenue authorities.
It is also discussed that cross provincial jurisdictional and conflict of interest issues also stifles collection of GST on services.
The sales tax on services needs to be collected centrally by FBR as per rates legislated by provincial governments.
Tax proceeds of GST on services can be transferred directly to provinces as per delineated jurisdiction and share.
In this regard it is decided that a joint committee comprising representatives of ministry of finance, FBR and provincial revenue authorities would be constituted to finalize proposal for central collection of GST on Services by the FBR.
It is further decided mechanism of transfer of tax proceeds of GST on services be worked out by the ministry of finance.
It is worth mentioning that prior the 18th Amendment to the Constitutions, the FBR was collecting sales tax on services. However, after the amendment the Sindh government was the first to establish a separate entity to collect sales tax on services arising within the jurisdiction of the province.
The other provinces also followed the same and set up their revenue collecting agencies.
Experts believed that the plan of the federal government would be reversal of such transfer of rights to the provinces.