Sindh Revenue Board (SRB) on Monday asked the Centre to withdraw proposed powers of FBR for disallowing input adjustments against provincial tax machinery as withholding agent for collecting taxes on behalf of Centre.
“The proposed amendments through Finance Bill 2016-17 are direct encroachments under 18th Constitutional amendment which will put federation at stake,” SRB’s Adviser Mushtaq Kazmi told the Senate Standing Committee on Finance which met under the chairmanship of Senator Saleem Mandviwalla here at the Parliament House on Monday.
The Adviser and Chairman SRB jointly presented their case before the Senate panel and argued that sales tax returns for services were received through fully automated system having no interaction among tax official and taxpayers.
Now the FBR made bound the SRB and other provincial tax authorities not to accept sales tax return until they paid withholding tax of the FBR. “Its tantamount to oy our taxation system,” they added.
The chairman SRB said that the FBR proposed them as withholding agent but they did not amend 153(7) enabling them to perform as agent on behalf of the Centre.
The FBR’s Member Inland Revenues (IR) Policy Rehmatullah Wazir told the committee that this issue would be related to non-filers and the collected money would be transferred back to provinces on account of 57.5 percent share of federal divisible pool (FDP) so they would be major beneficiary out of this collected money.
He said the FBR assured provinces to develop mechanism in collaboration with PRAL for collection of withholding taxes and software to this regard would be ready till July 01, 2016.
He said that it would not be possible to remain outside the tax net. He said Punjab seemed ready to support the Centre for collecting this tax when they assured them about developing of system with support of PRAL.
The FBR high-ups said that this issue triggered when Sindh did not clear Rs 21 billion on account of input adjustment of sales tax on goods.
The SRB high-ups argued that if someone approached the court then they would not be able to collect their sales tax returns, putting their taxation system in jeopardy.
They said that it could lead to mutiny as what would happen if they made laws binding filers of Goods of Declaration (GD’s) to pay sales tax on services.
The SRB high-ups replied that the Centre claimed input adjustments of RS 28 billion but their claims against FBR stood at Rs 32 billion. So it required verification for checking claims of both sides and reconciliation could be done.
When the Senate Committee sought technical input from economist Dr Kaiser Bengali, he argued that the FBR possessed powers to arrest non-filers so it should perform its own duty instead of relying upon work done by others.