ISLAMABAD: The Senate Standing Committee on Finance and Revenue has issued a stern warning to the Federal Board of Revenue (FBR), directing it to refrain from encroaching upon provincial tax domains during the finalization of the Finance Bill 2025-26. The committee’s admonition highlights ongoing tensions between federal and provincial tax authorities regarding jurisdictional boundaries.
During its fourth consecutive session, chaired by Senator Saleem Mandviwalla, the committee reviewed the Finance Bill, 2025. Senator Mandviwalla specifically cautioned the FBR against including services in various provisions of the Bill, emphasizing that services fall under provincial taxation. He cited observations submitted by the Sindh Revenue Board (SRB), which claimed that the FBR had “illegally entered into the domain of services” in the proposed legislation.
Dispute Over “Courier” Definition in Sales Tax Act
A key point of contention raised by the SRB, and highlighted by Senator Mandviwalla, was an amendment proposed in Section 8B of the Sales Tax Act 1990. The SRB objected to a definition of “courier” that combined both goods and services, arguing that “courier” is inherently a service and thus outside the purview of federal sales tax.
Under the proposed definition, “courier” means any entity engaged in the delivery of goods and collection of cash on behalf of a seller, including logistic services, ride-hailing services, food delivery platforms, and e-commerce delivery services.
In response, FBR Chairman Rashid Mahmood Langrial stated that couriers would operate only as a withholding agent and reiterated that the FBR had not included services in the new law. He indicated readiness to exclude ride-hailing services, food delivery platforms, and e-commerce delivery services from the controversial definition of “courier,” signaling a potential compromise.
The SRB also raised objections to proposed amendments in Section 8B of the Sales Tax Act concerning the limit of input tax allowance using the database automated exchange system, a matter that requires further clarification.
E-commerce Taxation and Support for Small Businesses
Senator Anusha Rehman raised critical points regarding the regulation of e-commerce platforms. She emphasized the need to avoid burdening unemployed individuals, particularly youth and women, who are relying on home-based businesses to make ends meet. She proposed that only platforms conducting business above Rs. 2 crore should be subject to mandatory registration.
Separately, Senator Mohsin Aziz commented on the proposed e-billing system, noting that Malaysia began its phased implementation three years ago. He stressed the need to assess Pakistan’s readiness for such a significant technological transition.
The committee also discussed the “Islamabad Capital Territory (Tax on Service) 2001” provisions of the Finance Bill, 2005. It was agreed that, in line with IMF benchmarks, a “negative list of services” should be developed for ICT, clearly defining services that remain exempt from taxation.
Rs43 Billion Undisclosed Funds in NADRA Accounts Exposed
A major disclosure during the session, related to the Public Finance Management Act, 2019, revealed that Rs 43 billion is being held in NADRA accounts under the surplus profit of various entities. It was further disclosed that other government institutions are also profiting from public service fees and property sales without transferring the generated revenue to the central treasury.
Senator Anusha Rehman strongly condemned this practice, stating, “The government is borrowing its own money from banks and paying interest, while institutions profit off public funds.” The committee promptly directed the Establishment Division and the Ministry of Finance to submit complete account details of all such institutions, including lists of their investments, profits earned, and the legal basis for withholding these funds from the national treasury.
Abolition of FED on Property Approved
In a notable approval during the discussion of the Federal Excise Provisions of Finance Bill 2025, the committee officially approved abolishing the Federal Excise Duty (FED) on the first purchase of immovable property. This move is expected to provide relief to property buyers and stimulate activity in the real estate sector.
Chairman Mandviwalla commended Federal Minister for Finance Muhammad Aurangzeb for his “diligence and active presence” throughout the budget review sessions, acknowledging the government’s commitment to transparent fiscal reforms.
The Senate Committee is scheduled to reconvene on Tuesday, where the Finance Minister is expected to address key tax exemption policies and provide further clarity on institutional financial practices. The meeting was attended by Finance Minister Muhammad Aurangzeb, Senators Farooq Hamid Naek, Syed Shibli Faraz, Anusha Rehman Ahmad Khan, Mohsin Aziz, Ahmed Khan, Munzoor Ahmad, Mohammad Abdul Qadir, and senior officials from FBR and other key departments.
