RGST Bill: ''Plan B'' Prepared by FBR
Monday, March 21, 2011
'Plan B', in case the Reformed General Sales Tax (RGST) bill is not approved by parliament, has been prepared by the Federal Board of Revenue (FBR) and submitted to the Ministry of Finance for possible action. The 'Plan B' includes a proposal to increase the rate of federal excise duty (FED) on selected items, including cement, and restoration of 5 percent excise duty on motorcars.
However, any enhancement in the rate of the FED on a few items would require legislative approval of the Parliament. FED on cement was slashed from Rs 900 to Rs 700 per ton in 2009-10 budget, designed to encourage construction business. And the proposal now is to enhance it to Rs 900 per ton. This would generate an additional amount of approximately Rs 5 billion. Another proposal is to restore excise duty on vehicles, which was withdrawn in 2009-10 budget. The federal excise duty on motor cars @ 5 percent was withdrawn vide SRO 474(l)/ 2009 of June 13, 2009.
The reason for withdrawal was to reduce cost of motor cars and thereby provide relief to the local automobile industry. In case the government accepts the proposal, the estimated revenue of nearly Rs 3 billion could be generated. Sources said that these are merely 'tax proposals', which would be finalised by the policy markers. As rationalization of tax rates is involved in these proposals, prior approval of Parliament is required for increasing tax rates.
The government has already proposed amendment in the Federal Excise Act, 2005 for increasing the rate of special excise duty (SED) from one percent to two percent through Finance (Amendment) Act, 2010. The Finance (Amendment) Act, 2010 is still pending before the National Assembly for passage. Through amendment of Federal Excise Act, 2005, in the Federal Excise Act, 2005, in section 3A, in sub -section (1), for the words "one percent", the words "two percent" shall be substituted.
The government needs additional local resources to relieve the pressure on the budget caused by extraordinary demands for expenditures relating to rehabilitation of a large number of internally displaced citizens due to the summer floods. For this purpose, it was proposed to amend certain provisions of the Income Tax Ordinance, 2001, and the Federal Excise Act, 2005 through a bill on the Finance (Amendment) Act, 2010. The proposed Bill provides increase in the rate of special excise duty from 1 percent to 2 percent under the Federal Excise Act, 2005. However, the Opposition as well as some coalition members refused to support these additional tax measures and the amendment bill remains stalled in parliament.
Labels: RGST
posted @ 9:25 AM,
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RGST Imposition: Economic Team to Brief Political Parties
Monday, December 20, 2010
With the mounting pressure from the donors, particularly, the International Monetary Fund (IMF), the government economic team headed by Finance minister, Dr Abdul Hafeez Shaikh, is getting ready for second round of presentations to the political parties on Reformed General Sales Tax (RGST).
Dr Abdul Hafeez Shaikh and his team in the second round would try to convince the political leadership of the country that RGST is an integral part of the government's economic reforms programme initiated sometimes back with a holistic approach to document the national economy.
The political parties will be informed that failure on part of government to put in place proposed RGST will have far-reaching negative impact on Pakistan- both in terms of revenue generation and credibility to honour commitments with the international donors that in such case will simply add to Pakistan's economic woes in the near future.
The second round of the presentation to the political parties on RGST will commence in the next couple of days. The finance ministry has already sent revised draft on RGST presentation to Prime Minister Syed Yousuf Raza Gilani, for approval. RGST has emerged as a highly controversial issue at this point in time.
Seeing opponent's hostile mood, the government assigned the job to Dr Abdul Hafeez Shaikh to pacify the political parties in and outside the parliament. He had held separate meetings with MQM leaders in Karachi and then with Mian Nawz Sharif and Mian Shahbaz Sharif in Lahore in the recent past but without any positive outcome.
The leaders of these two important political parties conveyed to Dr Abdul Hafeez Shaikh and his team that it was not a proper time for the government to venture for any new taxation measures like RGST. They have also demanded to delay RGST imposition for at least one to two years.
The government is finding no way out of the issue. It has either to go for RGST at any cost and get the last two tranches of $3.4 billion of $11.3 billion from IMF under the standby programme to give some financial support to its lowering foreign exchange reserves or succumb to the opposition pressure to delay its implementation. The second choice can put the government in another crisis as Dr Abdul Hafeez Shaikh and his team has already announced to quit the government if RGST plan did not go through.
Labels: RGST
posted @ 4:21 PM,
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Banking Sector and RGST
Wednesday, December 1, 2010
The General Sales Tax (GST) Bill 2010 is silent over some key issues of banking sector particularly services provided by banking companies. There are some important issues of banking sector have not been clarified in the General Sales Tax Bill 2010.
Issuance of Tax Invoice:
In the existing FED Rules, banks are not required to issue tax invoice, the proposed law is silent in this regard. The Rule 40 A (6A) of the FED Rules exempt the banks from issuance of tax invoices to their clients. The question arises whether such tax invoice would be required under the GST Bill 2010 or not?. Secondly, whether such exemption would continue under the RGST regime.
Exemption of Some Services:
Existing federal excise duty (FED) is applicable on all services provided by a banking company at the rate of 16 percent except for services against mark up/interest income, Hajj, Umrah, Cheque Book Issuance, Insurance Premium, Musharika and Modaraba Financing and Utility bills collection. After promulgation of GST Bill 2010, the FED at the rate of 16 percent will be converted into GST at the standard rate of 15 percent. However, it is not clear as to whether these services of the FED would remain exempted under the RGST.
Federal or Provincial Jurisdiction:
The main difference between FED and GST is that the former falls under federal jurisdiction, whereas the later falls within the provincial jurisdiction but collection rights may remain with FBR in certain cases. About the issuance of tax invoice, in the existing FED Rules banks are not required to issue tax invoice, the proposed law needs to clarify the issue. In case of sales tax return, this also needs to be clarified by FBR, whether the monthly return shall be filed province wise separately or a combined return is required to be filed with breakups of income and sales tax thereon for all provinces.
Maintenance of Record:
As far as maintenance of record is concerned, he said, all the branches shall be required to keep proper records of GST and related income for the purpose of audit. It is not clear as to whether it will be centralised or will have to deposited province wise; needless to state that the claim of input will also be on the similar lines if the bank so decides to claim the same.
Labels: RGST, Taxation, Taxation Updates
posted @ 10:29 AM,
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