ISLAMABAD: The National Tax Council (NTC) has constituted a technical committee comprising the Federal Board of Revenue (FBR) and the representatives of the provincial revenue authorities to recommend a single definition of "goods" and "services" to the executive committee of the NTC.
Sources told Business Recorder here on Monday the issue of definition of goods and services was discussed in detail during the last meeting of the Executive Committee of the NTC held at the Finance Division.
During the last meeting, the Member FBR stated that the subject, "sales tax on goods" pertains to the federation, and "sales tax on services" pertains to the provinces.
As per definition laid down in the Constitution and the relevant laws, the goods are tangible and movable items and anything not classified as good is service. In almost 99 percent cases, there is no dispute with regards to its definition.
However, one percent of transactions, about 6-7 items may involve both the services and the goods and as such a mechanism is required to be evolved to clarify them. Quoting hotel and construction sectors, FBR Member mentioned that the transactions may involve both the goods and services.
In order to resolve the issue, the meeting is required to agree on a mechanism such as sharing of receipts and majority principle etc. The representatives of the Khyber-Pakhtunkhwa Revenue Authority (KPRA) and the Sindh Board of Revenue (SRB) did not agree with the viewpoint of the FBR Member on the said issue.
The representative of the KPRA stated that the dispute was not on the definition of goods or services; rather supply of goods and services was the cause of dispute. They were of the view that the hotel and construction sectors cannot be classified as "goods".
In case the taxpayer has made any taxes on the goods consumed in the process, these would be refunded on production of receipts showing payment of taxes. The representative of the Balochistan Revenue Authority (BRA) stated that in order to sort out difficulties, a technical committee may be setup.
The chairman Punjab Revenue Authority (PRA) also supported the proposal. Senior Advisor Sindh Revenue Board agreed with the viewpoint of the Member FBR. However, he stated that the NTC may resolve what should be the definition of goods or services.
He said the SRB would send the proposed definitions of goods and services. Additional Finance Secretary (AFS) Finance Division stated that there was a general consensus to constitute a technical committee to recommend a single definition of goods and services to the executive committee.
It was agreed to constitute a technical committee comprising FBR Member Inland Revenue Policy and representatives of the provincial revenue authorities to look into the issue, and submit recommendations within two weeks after issuance of minutes of the meeting of the NTC. Senior Joint Secretary Finance Division will be the convener of the said committee, the sources added.
Copyright Business Recorder, 2020
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