Sindh High Court (SHC) has directed the Federal Board of Revenue (FBR) and Sindh Revenue Board (SRB) to submit their legal viewpoint on the collection of sales tax on “toll manufacturing” in line with the decision of the National Tax Council (NTC).
In this regard, the SHC has fixed the next date of hearing on 12th October 2022.
Taxpayers of Sindh have pleaded their cases in light of the NTC decision that the SRB will not charge provincial sales tax on toll manufacturing whereas the FBR will collect the same on the behalf of the federation.
According to the petitioners, they have placed on record a Notification of the SRB, whereby, an amendment has been made in Notification No.SRB-3-4/7/2013 dated 18.06.2013, after tariff heading “9824.2000” in column (1) and the entries relating thereto in columns (2), (3) and (4), another entry 9830.0000 has been inserted according to which services provided in the matter of such manufacturing or processing for others on toll basis as are levied to Federal sales tax under the Sales Tax Act, 1990 has been exempted.
The counsel for the petitioners submitted that earlier they referred to a Letter dated 28th October 2021 issued by the FBR according to which, the National Tax Council (NTC) in its meeting held on 16th September 2021 has already decided that Provinces shall not charge tax on toll manufacturing, which will rest with the Federal Board of Revenue, therefore, given hereinabove stance of the federal and provincial governments as well as the Amendment made through aforesaid Notification, instant Constitutional Petition(s) can be disposed of while holding that the Provincial Governments cannot charge or collect taxes in respect of “Toll Manufacturing”.
Let specific instructions in this regard may be sought from the chairman SRB as well as the chairman FBR in writing to know their stance in this regard, whereas, the learned Additional Attorney General (AG) Sindh and DAG shall also come prepared to assist the court in this regard on the next date of hearing, when instant constitutional petition(s) may be finally heard and disposed of the following law and no further adjournment will be granted, SHC directed the concerned authorities.
In September 2021, the Ministry of Finance, the FBR, and the provincial revenue authorities almost resolved the issue of the collection of sales tax on toll manufacturing; transportation businesses and restaurants through mutual consensus at the meeting of the NTC.
NTC decided that the sales tax on toll manufacturing will rest with the federation, while taxation rights on transportation business would be vested in the provinces.
Regarding taxation on the construction business, it was decided that the taxation right would be shared as per the constitutional arrangements, and a technical committee consisting of all revenue authorities would decide the operational modalities.
On taxation of restaurants, the finance minister, in his capacity as head of NTC and after having views of the FBR and the provinces, decided that the provinces will continue to tax restaurants.
The NTC had already directed the FBR to review the revised definitions of “goods” and “services” in line with the unanimous definitions agreed upon among provincial revenue authorities.
All stakeholders agreed to proceed ahead in the spirit of greater national interest and harmony under the umbrella of the NTC
