ISLAMABAD: The Federal Board of Revenue (FBR) issued SRO 1152 (I) 2014 in December to make up for some of the shortfall in sales tax revenue due to falling prices of petroleum which was estimated around Rs 68 billion.
Through the said SRO rate of sales tax was increased from 17% to 22% for motor spirit including HOBC, kerosene, light diesel oil and High speed diesel oil,” a well placed source at FBR told this scribe here on Wednesday, adding that expected revenue out of increased rate of sales tax was Rs 17 billion.
To a question regarding legal status of levied five per cent sales tax through an SRO instead of getting vetted from the parliament in the form of act, the official source said that under Article 7 of the Constitution, state was defined to include besides parliament any local or other authorities in Pakistan as are by law empowered to impose any tax or cess. This article suggests that the tax can be imposed pursuant to the powers conferred by parliament by an authority other than the parliament.
Moreover, the source said that the Article 77 provided that no tax shall be levied for the purposes of the federation except by or under the authority of act of the parliament. This article clearly provided that a tax can be levied either by the parliament itself or under the authority of act of parliament by any authority. The Federal government is on such authority. Similarly, the source further added that the parliament through clause B of the sub-section of section of 3 of the sales tax act 1990, has authorized the federal government to increase or decrease the rate of sales tax on any table supplies.
“The federal government may subject to such conditions and restrictions as it may impose b notification in the official gazette declare that in respect of any goods or class of goods imported into produced or any taxable supplies made by a registered person or a class of registered persons to tax shall be charged collected and paid in such manner a such higher or lower rate or rates as may be specified in the said notification,” the source read out the relevant clause.
Therefore, the source said that SRO was issued in exercise of the aforesaid power under the sales tax act 1990, it may be added hat SRO does not impose any new tax. It only raises the tax rate of the goods which were already taxable under section 3 (I) of the sales tax act 1990. This is in accordance with the letter and spirit of aforesaid clause as well in consonance with both articles 7 and 77 of the constitution.
These powers have earlier also been exercised by the Federal government through several SROs” the source said adding that in the past too, SROs issued under the same clause imposed sales tax at higher rate of 20% on 60 times and 17.5% on nine times.