Government to amend VAT bill -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

Government to amend VAT bill

By Mehtab Haider

ISLAMABAD: The government plans to introduce amendments to its VAT bill to replace its tag with “modified general sales tax (GST) regime” after taking the provinces, especially the Punjab and Sindh, on board on the issue of collecting tax on services.

“The IMF and the WB will also be taken into confidence during the first week of August 2010 on eve of review talks under the $11.3 billion Stand-by Arrangement (SBA) programme and then further amendments will be introduced to the VAT bill for changing its tag as the modified GST regime,” a senior official told The News after attending a high-level meeting, chaired by Minister for Finance Dr Abdul Hafeez Sheikh at the Finance Ministry here on Friday.

The meeting was attended by the former IMF official and adviser on the VAT, Dr Ehtisham Ahmed, WB expert Silvani, provincial finance secretaries of the Punjab and Sindh and Adviser to the Sindh Chief Minister Dr Kaiser Bengali.

PML-N leader Ishaq Dar was also called to the meeting at the later stage of deliberations. It is the commitment of the government to get approval of parliament on reformed GST by October 1, 2010. Official sources also claimed that they remained able to convince the US to use its influence with the IMF for allowing Islamabad not to use the name of VAT for moving towards the same objectives of ensuring documentation and bringing the whole chain of businesses into the tax net.

But a senior diplomat of a Western country having representation in the IMF’s board, told this scribe that it had yet to seen how much the US would be able to influence other members of the Fund’s executive board because it was the only condition of the IMF for providing $11.3 billion bailout package to Pakistan at the time of crisis in November 2008.

When contacted, Chairman FBR Sohail Ahmed said on Friday that it would be quite a complicated exercise for the government to bring changes in the existing sales tax regime. It seems possible that the government may introduce changes in the VAT bill by giving it the name of modified or reformed GST bill after taking all stakeholders into confidence.

“About the exact strategy to be adopted by the government in this regard, you should ask this question from the Ministry of Finance,” the chairman FBR said and added that the FBR was the implementing agency for collecting taxes as assigned by the government after approval of parliament.

However, the sources said the modified or revised GST regime would not change the proposed unified rate of 15 percent compared to the existing proposed standard rate of 17 percent. “It will give incentives to business tycoons that the rate of modified GST regime will reduce the burden from 17 percent to 15 percent,” said the official.

According to sources, in Friday’s meeting issues related to calls of origin came under discussion to determine the GST on services from telecommunication services. Sindh had agreed to give the right of collection to the FBR but the distribution of resources in terms of originating of calls or its destination needed to be determined to settle this issue.

The WB expert on taxation, Silvani, and Pakistan’s consultant Dr Ehtisham Ahmed asked the authorities to follow the best practices of other countries and evolve such a system in which input adjustment credit and refunds were made available to taxpayers without facing teething problems.

“If a taxpayer deposits services tax after using a hotel in Sindh, the system should facilitate him or her for getting refunds in any other province,” the sources quoted Silvani as saying during the meeting and concluded that the series of meetings would continue in days ahead in order to evolve a consensus among the stakeholders on thorny issues.
Source: The News