The Sindh High Court (SHC) has restrained the Federal Board of Revenue (FBR) from taking any coercive action against the stockbrokers who are resisting double taxation on brokerage services by the federal and Sindh governments. The SHC's stay order came in response to petitions filed by the KSE Stock Brokers Association (KSE-SBA) and 73 others challenging the constitutional right of the federal government to collect 16 percent federal excise duty (FED) from stockbrokers after the passage of 18th Amendment.
Having itself withdrawn FED in favour of the provincial governments since July 1, 2011, the FBR on June 29 issued show-cause notices to the brokerage firms ordering them to pay the levy with retrospective effect from July 1, 2011. This made the brokers knock the door of SHC where, Wednesday last, their counsel, Raashid Anwer, contended that the enactment of 18th Amendment had entitled the Provincial Legislature, Sindh Assembly, to impose the levy in question.
And that, under Sindh Sales Tax on Services Act, 2011, the provincial government, through Sindh Revenue Board (SRB), had already been collecting the tax at the rate of 15 percent which, in Sindh budget for FY16, had been revised downward by one percent to 14 percent. "Learned counsel for the petitioners has drawn our attention to Article 270AA(7) of the Constitution of Pakistan," reads the court's Order Sheet, a copy of which is available with Business Recorder.
Advocate Anwer is quoted to have told the judges that any attempt to impose Sales Tax on services had been impliedly repealed by the virtue of the Provincial Statutes. "Demand of Federation (for 16pc FED) amounts to double taxation," he argued. Also, the counsel contended that the impugned order in original passed by the FBR was illegal, unlawful and without jurisdiction to the ultra vires to the country's constitution.
The lawyer also produced copies of the verdicts the SHC had issued in past to restrain FBR in similar and identical circumstances. "(The) same treatment may also be given to the present petitioners," the counsel submitted. In response, the judges ordered to issue notices to Deputy Attorney General, FBR, SRB and the concerned Inland Revenue officials to appear before the court in the next hearing slated for August 10.
"Till the next date, respondents [FBR] are restrained to initiate any coercive action against the petitioners (stockbrokers) on the basis of the impugned order," the court decreed. Meanwhile, a KSE-SBA statement cheered the SHC's stay against the demand of FED by FBR. "After the passage of the 18th Amendment the Sales Tax on services is being collected by the SRB from all stockbrokers who are paying this tax since July 1, 2011," it said quoting the brokers' counsel as having told SHC.
Talking to Business Recorder, Muhammad Yasin Lakhani, chairman KSE-SBA and a KSE director, said the provincial authorities and stockbrokers were on the same page on this issue of "double taxation". "They (SRB) are with us on this unlawful levy," said the senior stockbroker who in an earlier statement had flayed FBR for harassing what he said tax complaint people and totally ignoring evaders.
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