Taxpayers facing double taxation due to different provincial laws: KTBA
KARACHI: The provincial finance ministries have been urged to resolve their differences on rights of taxability among themselves, as taxpayers are facing double taxation on services on the basis of origin and destination.
In communications sent on Monday to ministers of finance of Sindh, Punjab, Khyber-Pakhtunkhwa and Balochistan, the Karachi Tax Bar Association (KTBA) highlighted difficulties being faced by the taxpayers, registered with the Sindh Revenue Board (SRB), who are receiving notices from the Punjab Revenue Authority (PRA) and Khyber-Pakhtunkhwa Revenue Authority for services provided to persons in those provinces.
The KTBA said that the services, which are generally exposed to taxation at multiple jurisdictions, are franchise, transport, commission and services provided by Customs / clearing agents, container terminals, port operators, asset management companies, etc.
The bar said that there is divergence of views among the provincial sales tax authorities, whether the basis of taxation should be origin or destination of services.
“The anomaly in law has created difficulty for taxpayers and they have no option but to pursue courts for resolution,” the KTBA said.
It said that the provinces should resolve their difference on the rights of taxability among themselves, in cases, where a service originates in one province and consumed in another province so that the compliant taxpayers are not suffered.
“Article 141 of the Constitution of Pakistan limits a provincial assembly’s legislative competence to its province only,” the KTBA said and added: “It, therefore, cannot legislate for and resultantly cannot even create a legal fiction that makes an act taking place in another province amenable to its jurisdiction.”
The tax bar said that Article 137 of the Constitution further restricts the executive authority of a province to those matters with respect to which a provincial assembly has power to make laws.
The Karachi Tax Bar Association said that the federal government had been mandated under provincial sales tax laws to resolve any inter-provincial disputes in relation to sales tax.
The bar suggested as an interim solution that if tax has been deposited with one province, the other province should not press for payment of sales tax from the taxpayer on same service.
“Alternatively, till the formula for right of taxation is decided among the provincial sales tax authorities, they may be agreed upon a percentage of sales tax they will be entitled to receive which are presently taxable in multiple jurisdictions,” the bar added.
