No breakthrough in talks on RGST

[Lahore_Real_Estate]

ISLAMABAD (December 09, 2010) : The Inter-national Monetary Fund's remaining two instalments of $3.6 billion are likely to be further delayed as two days technical level talks between federal government and provincial governments failed to finalise draft RGST laws on services.

Source in the Finance Ministry said that implementation of RGST is a critical condition to qualify for the next tranche of the IMF. They said that this is highly unlikely that the IMF Executive Board meeting scheduled on December 17 would consider Pakistan case and release of next instalment is expected to be put off till meeting of Board in January 2011.

They said that meeting of secretaries will be held again ahead of National Assembly session on December 20 to finalise technical and legal aspects of draft RGST laws and evolve consensus on seven services.

To a question about the IMF programme and possible delay of next tranche, a provincial finance secretary, who has been engaged in technical level talks, said that federal government can respond to this question. He, however, said that there was no deadline to finalise the draft RGST laws on services.

He said the two-day talks have not been able to achieve any major breakthrough but proposed around 100 procedural as well as related to practical aspects changes in the law.

According to him the provincial RGST laws on sales tax would be derived from the federal legislation hence the Federal Board of Revenue has been asked to finalise modalities of some of the issues. When contacted, another provincial finance secretary on condition of anonymity claimed that "consensus has been reached on legislation minus some of the items." Sources said that no discussion has taken place on disputed seven major services between Sindh and Punjab but to a question about proposed rate on stand alone services, they said a lower rate was proposed for stand alone services that did not involve input tax adjustment. The final decision in this regard would be taken by the parliament, they added.

The meeting was chaired by Finance Secretary Salman Siddique and attended by the Finance Secretaries of Punjab, Balochistan and Sindh. The secretary finance Khyber Pakhtoonkhwa could not attend the meeting because of not being well.

Sindh and Punjab remained stick to their stance on seven services as an official of Sindh government said though "total revenue implication of Rs 800 million was insignificant, the province would contest its case in principle". Sindh viewpoint was as port is in its provinces, the collection right should go to it while Punjab contention was that as the RGST is consumption based tax and it should be charged by the province in which the services are consumed.