ISLAMABAD: The reconstituted National Finance Commission (NFC) is expected to hold its twice-postponed meeting on Dec 16, reopening at least two settled issues — collection of sales tax on goods and services by a federal agency and Sindh’s demand to make revenue generation a key determinant of provincial shares along with payment of around Rs300 billion arrears.
President Asif Ali Zardari had reconstituted the NFC in August for five years to work out the eighth award for distribution of resources among federal and provincial governments. Its first meeting was scheduled for Nov 16, but postponed to Nov 21 and then rescheduled for Dec 16.
The Sindh government has already protested over the agenda and working paper circulated by the federal ministry of finance in which one of the items for discussions include imposition of general sales tax on services in an integrated mode and its mode of distribution among provinces.
The federal government has also sought collection of GST on goods and services by a single agency --- Federal Board of Revenue --- to ensure smooth input-output adjustments.
A source in the Sindh government told Dawn that the chief minister had written a letter to the president to see to it that the ‘controversial issue’ was withdrawn from the NFC agenda.
“If the authority to collect GST by provinces granted by the 7th NFC award is withdrawn, the Sindh government will go back to its original demand for giving decisive weight to revenue generation in distribution of resources under the federal divisible pool,” the source said, referring to the chief minister’s letter to the president.
The source said there were indications that the federal government was trying to ‘reverse through a majority vote’ a provincial authority granted by the 7th NFC award to collect the GST on services.
Sindh will also take a firm stance on payment of over Rs300 billion in arrears transferred to other provinces over the last 10 years.
He said the 7th NFC award had accepted Khyber Pakhtunkhwa’s demand for payment of arrears of net hydel profit and Balochistan’s demand for payment of gas development surcharge. These payments on account of arrears are already being made by the federal government.
He said the Sindh government did not press for payment of arrears on account of replacement of octroi and Zila tax because its long-standing demand for collection of GST by provincial authorities was accepted.
A senior government official confirmed Sindh’s protest, but said three other provinces had different views on GST collection and hence it had to be discussed by all stakeholders.
He was, however, non-committal on the federal government’s position in view of the sensitivity of the issue, but added that there had to be some sort of uniformity to deal with a national question.
When asked about continuation of collection of federal excise duty on services while the Sindh government has already started collecting the GST, the official said the federal government was not keeping revenue collection under this head in its kitty, but automatically transferring to provinces in line with their settled shares.
The Sindh government official said the province had collected 50 per cent higher revenue on account of the GST on services in the first five months of the current year when compared with collection by the FBR. The Sindh government has collected Rs9 billion in GST on services in the first five months of the current financial year at the rate of Rs1.85 billion per month. By achieving 50 per cent higher yield, the Sindh administration has already proved wrong a perception at the federal level that the province did not have the capacity for the GST collection, the official said.
Dear visitor, the comments section is undergoing an overhaul and will return soon.