ISLAMABAD: While vowing to block the new tax measures proposed by the government, representatives of the MQM and the PML-N — strong opponents of the reformed general sales tax (RGST) — skipped an all-important meeting of the Senate Standing Committee on Finance here on Monday in which the members sought time to evaluate the controversial bill.

The draft proposes imposition of tax on a range of products and replacement of a single-stage levy with a multi-stage consumption tax.

MQM’s Senator Ahmed Ali, who is the chairman of the committee, and former finance minister Ishaq Dar of the PML-N preferred their foreign trips over the meeting that had been convened to discuss the proposed laws that, according to analysts, would determine the political future of the coalition.

The move also indicated that a boycott or abstention by opposition parties could give the government an opportunity to get the law approved by a majority in parliament. The bill was tabled in the Senate and the National Assembly on Nov 12.

Two important senators of the PPP — Waqar Ahmad Khan and Safdar Abbasi — were also absent, leaving a very difficult job to the lone representative of their party, Sughra Imam, to give arguments in support of the bill as her colleague Islamuddin Sheikh was asked to preside over the meeting.

All senior officers of the Federal Board of Revenue (FBR) were there to defend the draft of the law and answer questions by the committee’s members.

Most of the members showed hesitation to accept the bill in its present form and sought time to evaluate it clause by clause.

Senator Haroon Khan of the PML-Q was the only legislator who questioned the need for the new law, saying the government should first tap the potential sectors, including agriculture.

The representative of the ANP, a coalition partner, also called for imposing agriculture tax on income of more than Rs300,000, extension of tax to cantonment areas, reduction of excise duty to one per cent from the proposed two per cent, withdrawal of powers given to tax officials and continuation of exemption to locally-manufactured medicines, food items, branded items and education material and exemption on import of clinical and surgical instruments.

When FBR Member (Sales Tax) Iftikhar Qutub started giving a presentation on the proposed changes to the law, he was flooded with questions.

At the outset, almost all participants, including representative of the law ministry, complained of late distribution of the documents.

Attending the meeting on special invitation, former senator Chaudhry Mohammad Anwar Bhinder said the RGST was being extended to services which fell in the domain of the provinces under the 18th Amendment.

He said the federal government could not extend the law to services until resolutions in his regard were adopted by the provincial assemblies.

He suggested that the committee should see the constitutional and legal aspects of the bill before starting a formal discussion on its clauses.

Jamaat-i-Islami’s Khursheed Ahmad questioned the introduction of a uniform RGST rate, saying there were multiple rates in many countries.

He said the government should justify the need for the law, wondering why the government was in a hurry to get the bill approved.

Ilyas Bilor of the ANP and Kulsoom Perveen of the BNP-A said Balochistan and Khyber Pakhtunkhwa would get no benefit from the tax on services because the headquarters of all service providers were in Karachi or Lahore. Senator Talha Mehmood also raised the same question.

The Minister of State for Finance, Hina Rabbani Khar, said the levy would promote healthy competition which would benefit the provinces. She said the provinces had reached an understanding over the use and origin of services.

Special Secretary Wajid Rana said the Pakistan Telecommunication Authority had a mechanism to determine the usage and destination of services, especially telecommunication, for distribution of revenue among the provinces.

He said the government had worked on the matter for over a year.  However, there were differences among the provinces over collection on five services, he said.

In reply to a question, an FBR official said the RGST law covered taxation and not distribution.

At one point, the minister asked FBR officials to reply to the questions only in the affirmative or negative.