LAHORE: Federal Tax Ombudsman (FTO) Dr Asif Mahmood Jah has directed the Federal Board of Revenue (FBR) to ensure a uniform sales tax rate against services offered by the overseas employment promoters all over the country.
The Pakistan Overseas Employment Promoters Association (POEPA) had approached the FTO, seeking a direction to the FBR for charging of sales tax on service instead of turnover, stop applying the law retrospectively and ensure a uniform tax rate of 5 percent all over the country.
A complaint filed by the Association had agitated that the Islamabad Capital Territory (ICT) was charging 15 percent against 5 percent sales tax on the same service in the province of Punjab. Show cause notices were served by the Regional Tax Office (RTO) Islamabad requiring registration of promoters for sales tax purposes otherwise they would be compulsorily registered. The said RTO had also raised a demand of sales tax for tax year 2018 to 2021 based on the sales/services declared in the income tax returns.
According to the complainant, the FBR had agreed to forward a proposal for a uniform tax rate policy in the budget. Therefore, the complainant had sought intervention from the FTO against departmental notices until the uniformity of tax value in the ICT and the province of Punjab.
However, the Secretary Revenue Division, Islamabad, replied to the FTO that both the entities were authorized to charge sales tax as per their respective laws after the 18th amendment. He further pointed out that the federal government has already reduced to the tax rate to 15 percent from earlier 16 percent in order to provide some relief to taxpayers. The federal secretary also mentioned in his written reply that the issue of uniformity of tax rates was taken up by the National Tax Council (NTC) and decided that the federation and provinces have the authority and right to decide the sales tax rates on services. It is beyond the powers of the FBR to reduce rates and create parity at the national level.
However, the FTO has maintained that there is no denial of the fact that the rate of sales tax on overseas employment promoters is discriminately applied by the ICT against those in the province of Punjab and Sindh. Meanwhile, no tax has been notified by the provinces of Khyber Pakhtunkhwa and Balochistan. He further said that the ICT tax on services ordinance, 2001, was promulgated by the President and amended by the Finance Act, 2021, and this discrimination can only be removed through legislation.
According to the FTO, a glaring dichotomy and disparity in between the provinces and the federation is found to be discriminatory, adversely impacting the ease of doing business and tantamount to non-availability of level playing field. Therefore, the FBR is advised to remove this disparity and discrimination by proposing necessary amendments in the next budget proposals for the Finance Bill 2023-24.
