Bilateral sales tax adjustmentFBR, SRB, PRA likely to sign
MoU
SOHAIL SARFRAZ
ISLAMABAD: A Memorandum of Understanding (MoU) is expected among
the Federal Board of Revenue (FBR), SindhRevenue Board (SRB) and
Punjab Revenue Authority (PRA) on the proposed mechanism of
bilateral sales taxadjustment between federation and each of the
provinces. Sources told Business Recorder here on Sunday that there
are positive developments towards signing of the MoUbetween the
federal tax authorities and provincial revenue board/authorities.
The SRB has given positive response tothe FBR, which would lead to
signing of the proposed MoU to resolve the issue of input tax
adjustment.It is expected that a formal MoU will be inked between
the FBR and provinces during coming days, official added.
The FBR had shared draft MoU with SRB/PRA for comments. Federal
tax authorities are optimistic that the provincialrevenue
authorities/boards would agree with the draft MoU on the said
issue.
According to sources, the MoU can only be implemented after
mutual consent of all the parties. The comments of theSRB and PRA
are very important for the implementation of the MoU. Under the
draft agreement, the FBR and provinceswould have to agree on the
mutual mechanism of cross adjustment of input tax. After every
three months, the netadjustment would be worked out on the basis of
modalities being finalised under the draft MoU. The federation and
theprovinces would be able to bilaterally adjust the amount of
sales tax on signing of the MoU. Under the proposed
bilateralagreement, the FBR will be able to carryout bilateral
adjustment of the sales tax between federation and each of
theprovinces. After every three months, i.e., each quarter of
fiscal year, the FBR will estimate as to how much amount ispending
with the federation or provinces on account of input tax
adjustment. The FBR will reconcile the data withprovinces after
every three months for the bilateral adjustment of input tax,
sources added.In principal, Punjab Revenue Authority (PRA) and
Khyber Pakhtunkhawa Revenue Authority (KPRA) have agreed to
theproposal of the bilateral input tax adjustment and they have
shown their willingness to sign such bilateral agreement toresolve
the issues of input tax adjustment.Before 2011 sales tax on
services was collected by the FBR. Under the 18th Amendment and 7th
NFC Award,provinces were empowered to collect sales tax on
services. During the first year the FBR had collected sales tax
onservices on behalf of the provinces. The Sindh Revenue Board
(SRB) was the first provincial revenue board whichstarted
collection of sales tax on services in 2011.
Later, PRA and KPRA have also started collecting sales tax on
services. In Finance Act, 2013 amendment was made tothe definition
of provincial sales tax under which the FBR has disallowed input
tax adjustment against provincial salestax laws. The provinces
claim sales tax adjustment on services and federation claims sales
tax adjustment of goods. Asa result of cross-adjustment of input
tax, there are certain situations where the federation has to give
refund on thebehalf of provinces whereas provinces will do the same
in case of federation.
All rights reserved to Business Recorder (Date: printing date:
11-03-2014 05:38:33)
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