GST, 2010 tabled in Parliament

ISLAMABAD: The government on Friday tabled the General Sales Tax Act, 2010 in the Parliament amid protests from both opposition and allied parties to generate extra money under the commitment of international lenders.

Finance Minister Dr. Abdul Hafeez Shaikh introduced the bill in the National Assembly, while, Syed Nayyer Hussain Bokhari, Leader of the House in Senate presented the bill in the upper house.

The bill presented was to reform the sales tax regime by introducing and implementing a broad-based tax on sale and purchase of goods in all areas of Pakistan and services in the Islamabad Capital Territory on an integrated basis with the taxes on sales and purchases of services, specified by the provinces so as to form a broad-based and integrated tax regime on consumption in the country.

The proposed Bill will "provide for the levy of 10 % Surcharge on income tax payable for the tax year 2011", increase the rate of special excise duty from 1% to 2% under the Federal Excise Act, 2005".

According to the objectives and reasons of the proposed Bill the existing sales tax system has not performed well to broaden the tax base and several developed countries have replaced their traditional sales tax systems with modern versions of broad-based value added taxation.

The General Sales Tax Act, 2010 has been drafted to cover import and supply of goods for whole of Pakistan and sales and purchases of services of Islamabad Capital Territory.

It will replace the present Sales Tax Act, 1990.

The proposed new GST system will:

(i) reduce standard sales tax rate to 15% and increase exemption threshold to Rs 7.5 million;

(ii) curtail exemptions mostly to basic food items, charities and international/sovereign commitments;

(iii) provide no general zero-rating facility to local consumption;

(iv) promote documentation of the national economy and broaden the base of consumption/expenditure taxation in the country;

(v) modernize the value added tax system of the country by adopting international best concepts and practices of indirect taxation;

(vi) facilitate the cash flow of businesses through centralized/electronic expeditious refund payment system; and

(vii) provide for appropriate provisions to collect and administer Provincial sales tax on services in integrated manner alongwith Federal sales tax as and when authorized by the provinces.

MQM, PML-Q protest:

Muttahidda Qaumi Movement (MQM) and Pakistan Muslim League-Q appeared firm not to let the reformed General Sales Tax Bill, 2010 pass through National Assembly, and described it a final nail in the coffin of ailing economy' (of the country).

The coalition partner of the government in Centre and in Sindh, MQM seemed to have chosen its own course to follow when Dr. Farooq Sattar categorically said, "we would openly oppose it. We don't want to deceive the people."

Farooq Sattar's remarks came shortly after Finance Minister introduced the General Sales Tax Bill, 2010 amid furor by the Opposition benches against this new legislation, which they termed would multiply the miseries of already inflation stricken masses.

Espoused by the cheers and clapping of a good number of colleagues not only from his party, but also from PML-Q sitting around him, Dr. Farooq Sattar, who is also the Federal Minister for Labour and Manpower, said this new taxation regime was quite similar to Value Added Tax, but it had been orchestrated to go in the guise of GST.

"It'll implement on every single commodity and directly put a burden the people...we are shedding crocodile tears...a tsunami of price-hike is in the offing," he said.

The MQM leader offered to generate 1000 billion rupees from the country's economy and the budget as well provided all national resources were being mobilised efficiently.

He made this offer after the prime minister said Federal Government was facing difficulties to arrange Rs 160 billion for the reconstruction of flood-hit areas and rehabilitation of the victims.

He pressed for bringing about reforms in big giants like FBR, PIA, Steel Mill, PEPCO, WAPDA, arguing if put to the right direction these handful of organisations alone could earn the federal government Rs 160 billion which it directly needed at the movement.

Dr. Farooq Sattar said instead of imposing tax on common populace, it must be levied on the lands of feudal lords whose properties stretched on hundreds of thousands of acres.

In this connection, MQM, he said, would soon introduce a Land Reforms Bill, and hoped to muster support from the Opposition.

PML-N reaction:

Opposition Leader in the National Assembly Ch. Nisar expressed apprehensions over reformed General Sales Tax Bill, 2010.

He anticipated higher prices once the bill was passed, and vowed to resist it in strongest possible manner. "It (GST Bill, 2010) would be passed only if we are thrown out of the house."

Ch. Nisar cautioned the government not to take on Opposition as had been the practice during the previous regimes, saying they were much greater in number this time than the past.

He took strong note of the Government-IMF agreements which caused stress on the masses in the shape of price-hike, new taxes and inflation.

He proposed to have a Parliamentary Team that would hold `khuli kachehries' (open courts) to listen to the grievances of the people in each constituency.