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ISLAMABAD: In a positive development, the Federation and provincial revenue authorities/ boards, Tuesday, developed consensus over the common definition of goods/ services and common rules in place of supply (Place of Supply Rules).

The “Place of Supply Rules” would clearly give the taxing power to the relevant province after approval of the National Tax Council (NTC), officials added.

Sources told Business Recorder here on Tuesday that an important meeting on harmonisation of sales tax was held at the Ministry of Finance, here on Tuesday.

The meeting was chaired by the Special Assistant to the Prime Minister on Revenue, Tariq Pasha.

Through video link, the officials of the provincial revenue authorities/ boards attended the meeting. FBR Chairman Asim Ahmad and top officials of the Ministry of Finance also participated in the meeting.

The issues of common definition of goods/ services and common rules in place of supply and data sharing were discussed.

During the meeting held on Tuesday, it has been decided that the NTC would incorporate common rules in place of supply, as part of the decisions of the NTC. After approval of the NTC, the “Place of Supply Rules”, as developed by the provinces, would be implemented.

Similarly, the common definition of goods/ services have been approved by the provinces and yet to be implemented by the NTC.

NTC meeting on ‘harmonisation of sales tax’ deferred

Sources said that a key aspect in harmonising Pakistan’s sales tax was the need to distinguish the taxing powers of the federal government vis-à-vis that of the provinces, and further between the provinces, themselves.

Under the Constitution, the sales tax base is divided between the supply of goods (taxable by the federal government) and supply of services (taxable by the provinces), and hence, it is very important to define as unambiguously as possible the definition of what constitutes, a good, and what constitutes, a service.

Moreover, in the case of supply of services, as provinces have the right to tax the supply of services occurring within their province, when services are provided across different provinces, clear “Place of Supply Rules” are needed to give the taxing power to the relevant province.

Sources said that the harmonisation also required data sharing, clearing house to allow cross-agency tax credits, common return and rules. Further, harmonisation requires the smooth functioning of the NTC, which has been setup to aid in such efforts.

According to sources, the ultimate goal is to address the questions raised by the federal and provincial agencies, and to agree on a common definition of goods/ services and common rules in place of supply, data sharing and to give guidance to members of the NTC on specific issues.

Copyright Business Recorder, 2022


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