The Overseas Investors Chamber of Commerce and Industry (OICCI) has asked the Government of Punjab to cut the General Sales Tax on telecom services from 19.5 percent to 13 percent in the budget 2022-23.
In its tax recommendations to the Punjab Revenue Authority (PRA), the OICCI suggested that the sales tax rate on telecom services be equivalent to the General Sales Tax rate on other services to harmonize all the sales taxes on services rates.
The OICCI backed the exemption for both life and health insurance, arguing that because neither falls within the scope of the definition of ‘service’, they should be permanently included in the list of exempted services.
It also wants the constitution of a policy board to ensure synchronized policies, harmonized taxable services, revenue apportionment basis, and the eradication of all anomalies/conflicts between the legislation of the various revenue boards.
Furthermore, to minimize double taxation, ‘toll manufacturing’ should be removed from the category of services because it is subject to the Federal Sales Tax. The Withholding Sales Tax Rules should also be changed so that withholding among registered service providers and registered service receivers is consistent with the FBR.
The group urged Circular No. 01 of 2013 to be repealed, as a result of which the payment of sales tax on electronic media advertisement services should be in accordance with other jurisdictions (such as the SRB, KPK, BRA, and FBR).
The OICCI wants the PRA sales tax on services to be matched with the Sindh sales tax rate of 13 percent. The present rate should be maintained for unregistered entities and the rate differential will encourage unregistered taxpayers to register to benefit from input adjustment and will improve documentation, it said.
Moreover, Section 70, Chapter X of the Punjab Sales Tax on Services Act 2012, should be amended to allow for the recovery of tax demands from the taxpayers’ running finance facilities, which is inconsistent and contrary to natural justice principles, as well as detrimental to taxpayers’ business operations because no tax demands can be recovered from the taxpayer’s liabilities.
Under the Islamic financing transactions undertaken by Islamic banks for the acquisition of immovable property, the property will be kept in the bank’s name and transferred to the borrower’s name upon the expiry/termination of the financing arrangement. The registration fee, stamp charges, district, municipal, or town taxes, capital value tax, etc, are all applicable twice in this case — specifically at the moment of execution as well as the maturity/termination of the financing arrangement.
Resultantly, in order to prevent the duplication of these charges and taxes, Islamic banks like conventional banks hold the property in the borrower’s name.
The OICCI also recommended that the provincial government issue the following SRO/notification and publish it in their respective official gazette within the authority assigned by Section 9A of the Stamp Act of 1899 and Section 7(10) of the Finance Act of 1989:
The registration of sale or purchase of immovable property by banks or financial institutions under any Islamic mode of financing arrangement approved by State Bank of Pakistan or Securities and Exchange Commission of Pakistan shall be exempt from the levy of registration fee, stamp duty, district, municipal/ town taxes, capital value tax or any other related taxes.
In terms of other miscellaneous propositions, the OICCI recommended protocols to assess the sales tax on labor and manpower.