Punjab govt to impose 5% GST on services for ADP

[Naveed Yaseen]

* Finance Department recommends restoration of Capital Gains Tax

By Anwer Hussain Sumra

LAHORE: The Punjab government is likely to impose a five percent General Sales Tax (GST) on various services in addition to Capital Gains Tax (CGT) on property transactions to enhance revenue from indigenous resources for funds required for the Annual Development Programme (ADP) 2009-10.

The tax is being introduced due to a shortage in the revenue collection from provincial resources in the current fiscal year and an expected low share from the National Finance Commission (NFC)’s divisible pool, sources in the Finance Department told Daily Times on Friday. The Punjab government is likely to receive Rs 284 billion from divisible pool under the NFC, they said. The Punjab government’s current expenditure was estimated to be about Rs 300 billion in financial year 2009-10 against the Rs 257 billion of corresponding year 2008-9, they said.

All provincial revenue-generating departments and agencies only managed to collect 60 percent of the target (Rs 40.36 billion) from indigenous resources. The provincial government had fixed the target for eight taxes, which included urban immovable property, motor vehicle and stamp duty. The sources said tax collection should be 90 percent of the target by the end of the ongoing fiscal year’s 11th month.

They said poor law and order, economic recession and abrupt transfers in various revenue-generating departments and agencies were the main obstacles causing low recovery of funds.

They said heavy expenditures in lieu of an Rs 40 billion subsidy on various pro-poor schemes and Rs 12 billion in account of the raise in police officers’ salaries had disturbed the provincial kitty. To balance the incoming and outgoing expenditures, the government would impose taxes on various services. The Finance Department has proposed to initially impose a 5 percent GST on services and professions like doctors, teachers, lawyers, beauty parlours, marriage halls and upscale private educational institutions in the upcoming budget, the sources said.

Restoration: The Finance Department recommended the restoration of the CGT (abolished in 1986) on property transactions. It was replaced with the ‘stamp duty’ on property transactions to earn more from ingenious resources by parliament. Presently, the Punjab government levied 16 GSTs on five sectors of services - couriers, caterers, services rendered by clubs, TV/Radio advertisement and customs agents. The tax was being collected by the federal government and then transferred to the Punjab government for utilisation after service deduction, the sources said.

Senior government officials, financial experts and senior parliamentarians held several meetings in regard to the upcoming budget. However, sources said Punjab Chief Minister Shahbaz Sharif would take the final decision.

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