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No ST on forex transactions in a bid to strengthen rupee

No ST on forex transactions in a bid to strengthen rupee

ISLAMABAD: Federal government has withdrawn sales tax levied by the provincial governments on foreign exchange transactions of exchange companies so that it can aide in governments efforts to strengthen the country’s currency. The decision is in line with the decision taken by the Council of Common Interests (CCI).

Sources said that the CCI decision further strengthens the viewpoint of the Finance Ministry that such kind of taxation may adversely affect the government efforts to bring down exchange rate. The CCI decision has been communicated to all Chief Secretaries and the Finance Division for withdrawal of sales tax on foreign exchange transactions carried out by exchange companies.

Federal Board of Revenue will take necessary action on the CCI decision in case of sales tax on buying and selling of foreign currency transactions under intimation to the Finance Division. In this regard, the federal tax authorities would also co-ordinate with the provincial governments of Sindh and Punjab.

Referring to the last meeting of the CCI, sources said that the Finance Minister had informed the meeting that the governments of Sindh and Punjab have promulgated sales tax on foreign currency transactions. The Finance Minister revealed that he has already written a letter to the governments of Punjab and Sindh for withdrawal of the sales tax on foreign currency transactions. The Finance Minister stated that efforts are being made to bring down the exchange rate vis-à-vis dollar as imposition of such taxes will hinder the government efforts.

Sindh Chief Minister mentioned that as per superior court’s judgements all kind of services are taxable. The Finance Minister clarified that currency exchange cannot be termed as service and there is no tax on the difference of currency exchange throughout the world and hence proposed to withdraw the sales tax imposed by the governments of Sindh and Punjab, the same being not sustainable. The Prime Minister mentioned that the imposed sales tax on foreign currency is totally unsound. The Punjab Chief Minister said if sales tax was bringing bad effects on the national currency the government of Punjab will withdraw its notification. The Chief Minister Sindh endorsed the view of the Punjab Chief Minister.

Council of Common Interests considered the summary dated February 7, 2014 submitted by Finance Division and approved withdrawal of the sales tax levied by the governments of Sindh and Punjab on foreign exchange transactions of exchange companies, sources added.