Full-fledged functioning of NTC may take some time

The full-fledged functioning of the National Tax Council (NTC) may take some time due to the partial lockdown, and outbreak of the coronavirus, as the council has the mandate for harmonization of the GST on both goods and services among Center and the provinces from next budget.

Sources told Business Recorder that it is yet to be decided that whether the NTC would function under the jurisdiction of the Council of Common Interests (CCI) or in the domain of the National Finance Commission (NFC) Secretariat.

The harmonization of the GST is part of World Bank's budgetary support loan of $750 to $900 million.

Under harmonization of the GST, the Center and provinces will make efforts to evolve consensus on uniform tax return, single GST rate, and other requirements for both goods and services, so the taxpayers will have to file single return instead of filing five separate returns on a monthly basis; one at federal level into the FBR, and four in respective federating units.

According to the sources, the NTC was established, but it has to become formally functional after outbreak of COVID-19 pandemic.

Once the NTC evolved consensus, the Finance Bill, 2020, would incorporate necessary changes for moving towards unified GST regime for both goods and services, and it would be a major step towards harmonization of taxation system in Pakistan in the aftermath of 18th constitutional amendment.

According to sources, the NTC could not hold its formal meeting because it required hours' long deliberations to strike consensus on all issues related to harmonization of the GST on goods and services.

It was the major objective of the NTC to evolve consensus on harmonization of taxes among all stakeholders.

The Centre and the provinces had agreed to set up a NTC to devise uniform taxation policies.

In the past, the NFC's Monitoring Committee in its meeting chaired by Adviser to the PM on Finance Dr Hafeez Shaikh gave the nod to the establishment of the council.

The finance ministers of Khyber-Pakhtunkhwa and Balochistan also attended the meeting, while Punjab and Sindh were represented by their finance secretaries. Committee approved the composition of the council and its terms of references. The Finance Ministry said the provinces were represented in the council and "it shall enable them to decide collectively the rate of sales tax for both goods and services".

The council will meet at least once in every quarter, and its recommendations will be expressed in terms of majority and placed before the NFC Monitoring Committee.

All five finance ministers will be members of the council, while its executive committee will comprise the federal finance secretary and chairpersons of the FBR and provincial tax authorities. According to the terms of references, the council will be responsible for sales tax harmonisation, agree on a uniform GST rate on goods and services, a uniform portal, a uniform tax returns form and also settle the definition of goods and services.

The council has been given the mandate of deciding the principle of division of the GST on services, on the basis of destination or the origin of the service. More importantly, the council will also decide sales tax exemption policies and thresholds. The Centre and the provinces will try to agree on a harmonised GST regime in the country before the next budget to make legal changes in the next finance bill.