A senior government official told Business Recorder on Monday that the GST Bill 2010 would only authorise the Parliament to grant sales tax exemption through amendment in the First Schedule (Exemption Schedule) of the GST Bill 2010. Therefore, the FBR would not be empowered to grant sales tax exemption through a notification, order or SRO.
This is a major change in the existing Sales Tax Act, 1990 and General Sales Tax Bill 2010 which has drastically curtailed the powers of the tax authorities for granting exemptions. The FBR has taken this bold step voluntarily to avoid pressure of powerful lobbies and influential groups which managed to obtain exemptions in the past. Now, anybody having intention to obtain sales tax exemption has to approach the Parliament in view of the fact that the FBR would no more be empowered to grant such concessions/exemptions.
The same has been clearly reflected in the draft of the GST Bill 2010. According to section 11 of the GST Bill 2010, a supply or import shall be an "exempt" supply or import if it is specified as an exempt supply or import in the First Schedule of this Act or it is a supply of a right or option to receive a supply that will be an exempt supply. Secondly, a supply or import shall be an "exempt" supply or import if it is specified as an exempt supply under a Provincial Sales Tax law.
In case of zero-rated supplies, a supply or import is a "zero-rated" supply or import if, it is specified as a zero-rated supply or import in section 23 or 25 or in the Second Schedule of this Act or it is a supply of a right or option to receive a supply that will be a zero-rated supply; or it is specified as a zero-rated supply under a Provincial Sales Tax law, GST Bill 2010 added.
According to sources, the new GST Bill 2010 would withdraw powers of the FBR to grant exemptions through statutory regulatory orders (SROs) or special orders to any items or sector. Only Parliament would have to grant exemption on any sector or items. However, the FBR or Finance Ministry would not be empowered to grant exemption by issuing SROs or exemption orders on its own. This bold decision has been made part of the GST Bill drafted by senior most sales tax officials.
Sources said that the board wanted to surrender its powers to issue exemption orders and SROs pertaining to exemptions and concessions to the Parliament under the proposed GST bill 2010. Under the GST Bill 2010, the FBR has incorporated best international VAT practices where tax authorities are not empowered to issue exemptions and concessions, creating distortions in the VAT chain.
The drafters of the GST Bill had voluntarily taken this decision to give up their own powers to issue exemption and SROs. The powers would have been handed over to the Parliament, which would have the authority to issue exemptions.
One of the major reasons for introducing GST Bill is that the influential lobbies and powerful groups have obtained hundreds of exemptions through SROs and special exemption orders issued under the provisions of the existing Sales Tax Act. It was a strategic decision to take away powers of the FBR for granting exemption to check the influence of the groups and lobbies enjoying hundreds of exemptions under the existing law, sources added.