KARACHI: Sindh Chief Minister Murad Ali Shah on Saturday said that the Federal Board of Revenue (FBR) is trying to recover double taxation, as at the time of payments to suppliers the Sindh Accountant General (AG), withholds and deposit the same amount to FBR as `Withholding Agent’ and now the FBR has again been claiming the same amount.
The chief minister stated this while presiding over a meeting here at Chief Minister House to decide the matter pertaining to FBR, RTO-III, Karachi that has raised a demand of thousands of rupees against various Sindh government departments/offices on account of payment of various taxes.
The FBR, RTO-III, Karachi has raised a demand of Rs4.32 billion income tax and withholding tax on goods against various departments of the Sindh government.
Quoting the case of jute bags for food department, the chief minister said that the FBR has issued notices for recovery of Rs260.4 million income tax with regard to purchase of jute bags, PP bags and Tarpaulin during a tax year, 2010-11 to 2015-16.
He added that as a matter of fact, the jute industry is exempted from income tax according to an SRO issued by the federal government. He said in regard to the PP bags, the Accountant general Sindh, at the time of payments had already deducted the tax. “This is a double taxation against the Sindh government,” he said.
The Finance Department officers told the chief minister that out of Rs4.328 billion tax arrears demanded by the FBR Karachi is the principal amount. The principal amount of Income Tax is Rs435.277 million and Rs1.33 million is a penalty and Rs3.89 billion is the withholding tax on goods.
During the scrutiny and deliberation in the meeting, it was surfaced that the demand created by FBR was on the basis of total budgetary allocation and blanked calculations without considering real-time transactions and at-source deduction of the taxes by the office of the Accountant General Sindh.
The chief minister after going through the FBR orders said that the FBR officers have passed orders ex-parte without hearing the concerned department. He was informed by different departments that in some cases, orders-in-original, show cause notices and hearing notices were not delivered to the relevant departments due to which the period provided to lodge appeals has become barred by time limitation and therefore they had requested for consideration so that they could lodge appeal to offer their defence at the relevant appellant forum.
Chief Secretary Rizwan Memon told the chief minister that he had held a meeting with the chief commissioner and commissioner RTO-III on April 19, 2018, wherein the Finance Department was assigned to complete the reconciliation task with the FBR and other stakeholders. Therefore, he has directed all the departments and AG Sindh to be on board to complete the reconciliation task.
The chief minister was informed that on cross verification, the tentative figures given by the Sindh AG indicated that out of total demand of Rs4.328 billion and amount of Rs645.522 million against Income Tax and Rs20.629 million against GST on goods have been deducted at-source by AG Sindh leaving behind a disputed amount of Rs3.662 billion against GST on goods which required reconciliation.
The Finance Department has approached chief commissioner, FBR for withdrawing attachment orders and simultaneously contacted State Bank of Pakistan (SBP) and National Bank of Pakistan (NBP) for not entertaining such attachments made by FBR.
The CM pointed out a letter of SBP to the NBP president of dated August 30, 2017, which reads as “Under the agency agreement executed between State Bank of Pakistan and NBP, the NBP is authorised to act as collecting agent of SBP. NBP is the sole banker. Furthermore, the funds lying in the government banking accounts are part of their consolidated account, out of which money can be withdrawn after due process of appropriation.”
The letter further reads as “NBP thus has no authority to appropriate the receipts it is holding on SBP account pursuance of the notice issued by the taxation authorities. It is, therefore, requested that all concerned in NBP may be directed not to make any appropriation of money held on principal account.”
The chief minister said that the NBP is not authorised to an appropriate amount from Sindh government account. He added that he would talk to the federal finance minister to direct the FBR to attachment orders. “We would take strict action if the amount is withdrawn from the Sindh government accounts,” he warned.
The chief minister directed the chief secretary to provide services of Sindh Revenue Board Tax Consultants to all the provincial government’s departments so that they can deal such cases. There is also a need of capacity building of concerned provincial department officers who deal Sindh AG and FBR matters. He constituted a committee comprising SRB Consultant Mushatq Kazmi, Local Government Secretary Ramzan Awan and Finance Special Secretary Mr Shohaib to make necessary documentation and reconcile the claims made by the FBR.