ISLAMABAD – To the utter surprise of all, the Senate Standing Committee on Finance and Economic Affairs on Tuesday unanimously passed the drafts of Reformed General Sales Tax (RGST) Bill and Flood Surcharge Bill with all diehard opponents – both in ruling alliance and Opposition – keeping complete mum except making a few recommendations to be incorporated in the aforementioned drafts.
The Committee met under the chair of Senator Islamuddin Shaikh. The Committee Chairman Senator Ahmed Ali, an MQM MNA and a strong opponent of RGST, was not present in the two-day meeting. The Committee did not face any hurdle in the passage of the drafts of these bills, as neither opposition party nor the coalition partners opposed them.
The Committee members suggested giving tax exemptions to all food items whether they were packed/ canned or open commodities. Similarly they demanded that the Government should also exempt all types of locally produced medicines and stationary items including books from taxes.
Talking about Flood Surcharge Bill, the Senators suggested that minimum level for this tax should be enhanced to Rs 0.5 million instead of Rs 0.3 million. These recommendations would be presented in the Upper House of the Parliament in the next couple of days, which would then refer them to the Lower House.
The Committee approved increase in Special Excise Duty from one to two per cent.
Earlier talking in the meeting, Finance Minister Abdul Hafeez Shaikh said, “We have no other option but to introduce RGST in the country for revenue generation.” He was of the view that prices of those items would go up which were still exempted from the taxes, while prices of some commodities would come down, as the GST percentage would be reduced to 15 percent from 17 per cent in RGST, he added.
“It will not have even a least effect if we do not get the tranche from International Monetary Fund (IMF), however by not bringing RGST, we will give negative message to the international community,” he said. He further said that military as well as political governments failed to start structural reforms in the economy in the last 20 to 30 years.
He said, “We have to generate our own resources in order to get rid of IMF. If we do not introduce RGST and power losses, how would we make our budget?” He said, “I am ready to discus the Government’s expenditures in this Committee whenever it wants. The Committee members then can tell me from where we have to cut the expenditures. However it would not be in billions which we expect to generate through reforms in our taxation system,” the Minister added.
Talking about the National Finance Commission Award and the 18th Amendment, Shaikh said, “We have transferred the resources from the Centre to the provinces, which is a great achievement. However, the Centre has suffered a lot in the first year, as our fiscal deficit surged to 5.2 per cent from the targeted four per cent.”
The Secretary Finance informed the Committee that Federal Board of Revenue (FBR) would only collect tax on service sector when provinces would authorise it by making change in their laws. He was of the view that provincial governments would also table their drafts at the end of this month. “We held more than 50 meeting with provinces for creating consultations on RGST,” he added. He further informed that three provinces were ready to authorise FBR for collecting GST on services in their laws and only Sindh wanted to collect it at its own.
Earlier Senator Safdar Abbasi of Pakistan PeopleÂ’s Party said that there were a lot of constraints in the Bill and it could be challenged in the courts, therefore the Government should withdraw it from the Parliament and new improved bill should be tabled.
Senator Ishaq Dar of Pakistan Muslim League (Nawaz) said that the Government tabled the Bill in a rush as they were facing pressure from donors to table it in the Parliament before Pakistan Development Forum. He said there was no need for the provincial assemblies to pass any resolution for RGST. He said the Government should consider its all aspects otherwise strikes could start in the country due to passage of RGST.
Later MQM presented its resolution seeking not approval of RGST from the Committee and imposition of tax on agriculture sector, besides taking measures to control corruption.
Online adds: The Committee also approved amendment of not implementing flood surcharge on those individuals earning less than Rs 500,000.
The MQM also tabled its dissention note on the opposition of this bill which stated that the govt instead of RGST could earn billions by imposing tax on agriculture sector.
All the four provinces would begin the process of legislation regarding RGST (reformed general sales tax) on November 27-28, as all the four provinces have consensus regarding the issue.
Senator Ishaq Dar said that Nawaz Sharif had addressed all the concerns and reservations in his letter addressed to the Government, whose reaction had been equally positive.
Debating the issue, Senators Safdar Abbasi and Professor Khurshid Ahmad stressed on withdrawing the proposed Bill from the Parliament.