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ISLAMABAD: The Federal Government has prepared finalised transition plan to grant provisional constitutional status of province to Gilgit- Baltistan (GB), which requires funding of Rs 500 billion over ten years, in addition to other changes in taxation and revenue laws, well informed sources told Business Recorder.

According to Ministry of Kashmir Affairs and Gilgit-Baltistan, Gilgit-Baltistan is presently governed under the Presidential Order “the Government of Gilgit-Baltistan Order, 2018”.

The Ministry maintains that the Federal Government is considering a revised constitutional package given the ambit of Constitution of Islamic Republic of Pakistan, 1973. A draft of Constitutional Package, with consensus of relevant stakeholders has been prepared accordingly. In this regard a proposed ‘’Transition Plan for Provisional Constitutional Province of Gilgit-Baltistan” has been prepared by Government of GB.

The sources said the transition plan is drawn up by a team of experts under the guidance of the political leadership of GB. The area has all the ingredients to become a successful economic area at the crossroads of Asia.

It is the responsibility of all the stakeholders, especially the federal government, to realize this potential through short, medium, and long-term planning and investments in the region’s natural resources, infrastructure, institutions and public services. The primary objective of this transition plan is to ensure sustainable transformation of GB into a provisional province.

The current fiscal requirement calculated in this transition plan is an estimated Rs 500 billion over ten years. This amount needs to be invested in creating revenue generating assets, such as hydropower projects and other economic infrastructure.

Although, the economic plunk of the transition plan by necessity, recommends continuing and enhancing existing subsidies in the long term, a viable GB government will need fiscal autonomy to be effective and bring about sustainable economic growth. By all assessments, hydropower, mines, minerals, and tourism development can generate much needed economic activity and revenue for the government.

Other elements of this transition plan include legal, administrative, and constitutional provisions, including modalities of representation in the highest organs of the state with attendant rights and privileges, and how to make a smooth transition from an administrative, to a constitutional province. The document is divided into four chapters, each focusing on a specific area of transition, including fiscal, legal, services and miscellaneous.

The integration of GB into Pakistan’s mainstream, through the proposed constitutional amendment, will be a landmark achievement and the highest water mark for the people of GB since their accession to Pakistan. This transition Plan, if implemented concurrently to the passing of the constitutional amendment bill in the national Parliament, will go a long way in appropriately realizing the objectives of the entire exercise for the benefit of the people of GB in particular and Pakistan in general.

The change in the constitutional status of the region will have a legal bearing on the region.

Therefore, it is vital to offer clarity specially in determining the legal scope of the existing federal legislations relating to taxation.

The following laws deal with the issue of Taxation through which the Federal Government can levy taxes: (i) The Custom Act; (ii) The Federal Excise Duty Act; (iii) The Federal Sales Tax Act; (iv) The Income Tax Ordinance, 2001; and (v) Federal Finance Bill.

The Gilgit-Baltistan Council had adapted the “Gilgit-Baltistan Council Income Tax (Adaptation) Act, 2012” on 21 March 2012 through which taxes were collected from GB at the rate of 50% discount from the citizen of Gilgit-Baltistan as compared to the citizen of Pakistan. After adaptation of the Ordinance the GB Council through its Inland Revenue Office established at

Gilgit started collection of taxes due to which people started protests throughout the region and there was apprehension of law & order situation due to which the Council vide Notification of January 4, 2018 restrained the department of Inland Revenue from collection of all taxes. It further added that the Federal Government in a Notification on July 23, 2018 has exempted Chitral, Dir, Swat etc. from all Sales Taxes including tax chargeable under Section 13 of the Sales Tax, 1990. The Federal Government has also exempted FATA and PATA areas from Sales Taxes under Sales Tax 1990 after making FATA part of Constitution. Similarly, the Constitution of Pakistan was amended on 4 June 2018 by Parliament and FATA was made part of the province of KP by making amendments in relevant articles of Constitution which deal with the provincial matters.

The above laws expressly mention that the Federal Government can impose taxes throughout Pakistan as and when required unless and until not exempted by the Constitution through insertion of a special saving Article in the Constitution.

Relevant Article of the Constitution under while Taxes can be imposed: The Constitution of the Pakistan has different Articles which defines the powers and functions of all the institutions. The Constitution also provides different Articles under which Parliament can make legislation by invoking those Articles. Under Article 165A the Majlis-e-Shoora (Parliament) has the power to make laws to provide for levy and recovery of taxes. Article 50 of the Constitution defines the Majlis-e-Shoora (Parliament) consisting of the President of Pakistan, the National Assembly, and the Senate of Pakistan. All the laws which deal with taxation and exemption can be made under Article 165A, hence unless and until a specific provision for exemption of Gilgit-Baltistan from taxation, till settlement of Kashmir Dispute is inserted, then all the taxes will automatically be applicable in the territory of Gilgit-Baltistan, hence a special provision by amending the relevant Article of the Constitution for exemption of taxes is required to be inserted.

Article 279 of the Constitution protects the laws in term of continuation unless and until repealed or amended by another legislation. The relevant Article is reproduced as under Article 279. Notwithstanding anything contained in the Constitution all taxes and fees levied under any law in force immediately before commencing day shall be continued to be levied until they are varied or abolished by Act of appropriate legislation.

In the constitution after article 279 the following shall be added: Article 279A states “Notwithstanding any other provision, in respect of any natural person of Gilgit Baltistan or legal person with ownership rights of the natural person of Gilgit Baltistan, the existing regime of Income Tax and Federal Excise Duty as applicable to Gilgit Baltistan before commencement of 26 amendment, shall continue to apply. From time to time the Federal government shall provide for wholly or partial tax free and other Economic Zones. Provided that subsides of wheat, oil and gas being provided by the federal government shall remain intact till the settle of Kashmir dispute.”

The basic scheme of the proposed Article is that all the laws/acts and even ordinances will remain in operation unless and until revoked, repealed, or expired being time bound laws etc. Hence, if a special provision pertaining to Gilgit-Baltistan regarding applicability of Taxation Laws is not inserted in the Constitution, then the existing laws will be applicable in the territory of Gilgit Baltistan and all the taxes can be collected accordingly. In view of the above an amendment in the relevant Articles of the Constitution for exemption of taxation till settlement of Kashmir Dispute under UN Resolutions is advisable.

Exemption from Taxes and saving of Deeds, Agreements and Contracts: Article-279 of the Constitution needs to be amended by inserting two new Articles as Article - 279A and 279B by inserting the following in Article-279A: “No direct Taxes shall be levied/imposed in the territory of Gilgit-Baltistan till final settlement of Kashmir Dispute under UN Resolutions and Gilgit-Baltistan become a full-fledged Constitutional Province like other provinces provided that the subsidies of wheat, oil and gas which are being provided by the Federal Government shall also remain intact till settlement of Kashmir Dispute and Gilgit-Baltistan becoming a full-fledge Constitutional province.”

Provided further that the budgetary requirement of Gilgit-Baltistan will be met from NFC Award or through Grant-in-Aid in consultation with the Gilgit-Baltistan Government.

Article-279 B (Saving of Deeds, Agreements and Contracts): The Accession Deed signed between the people of Diamer District (Sub-Divisions Darel-Tangir and Chilas) with the Government of Pakistan in the year 1952 and endorsed by the Supreme Appellate Court in its Judgment given in case No.

SMC-18/2009, of April 16, 2011: Such deeds and agreement should have legal force to avoid any needless disputes. All other similar deeds, agreements, and contracts signed between people of other areas of Gilgit-Baltistan with the Government of Pakistan should continue to have a legal force.

In the meeting of the Transition Committee, it was decided that Law Department will seek written recommendations from Registrar Supreme Appellate Court, Chief Election Commissioner and Gilgit-Baltistan Chief Court respectively regarding the assets, and the future of employees.

The proposed amendments are as follows: (i) the word “and Provisional Province of Gilgit-Baltistan” may be inserted after the word “Province or Provinces” where appeared in Article 161; (ii) proposed amendment in Article 163, the word “and Provincial Assembly of Gilgit-Baltistan” may be inserted after the word “Provincial Assembly” where appeared in Article 163; (iii) proposed amendment in Article 164 - the word “and Provisional Province of Gilgit-Baltistan” may be inserted after the word “Province” where appeared in Article 164; (iv) proposed amendment in Article 165 and Article 167 - the word “and Provisional Province of Gilgit-Baltistan and “Provincial Assembly of Gilgit-Baltistan” may be inserted after the words “Province” or “Provincial Assembly” where appeared in Article 165 and Article 167; (v) proposed amendment in Article 235 - the word “and Provisional Province of Gilgit-Baltistan” may be inserted after the words “Province” or “Provinces where appeared in Article 235; and (vi) proposed amendment in Article 250 - the word” and Provisional Province of Gilgit-Baltistan” and “Provincial Assembly of Gilgit-Baltistan” may be inserted after the words “Province” or “Provincial Assembly” where appeared in Article 250.

Copyright Business Recorder, 2022


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