The Income Support Levy Act, 2013 has been challenged as ultra vires of the Constitution in the LHC. The levy was challenged on the grounds that it is discriminative in nature; as it is applicable and collectable from a taxpayer and no other person. Secondly, the levy is a fee and cannot be passed as a Money Bill through an Act of the Parliament. Thirdly, the levy tends to take away the already taxed property of the person which can only be taken away by the state in case of emergency.
Fourthly, the person pays all direct and indirect taxes and must be informed as to why the state needs this levy when they have sufficient funds collected from the sources. The spending must be identified by the state under Article 19A. The levy does not fall within the definition of the Federal Consolidated Fund, hence, not passed in accordance with the provisions of Article 77 of the Constitution. The levy does not qualify to be passed as a Money Bill as the same is not part of Federal Consolidated Fund as defined in the Constitution.
The levy is a sort of double taxation as the accumulated wealth represents income already taxed or exempt income, sources added. Furthermore, it has been challenged that the constitutional guarantees given to the persons to hold property have been taken away through passage of Income Support Levy Act, 2013, which being a fundamental right cannot be taken away, but only in state of emergency.
It has been argued that the movable assets have already been taxed and protected under Article 24 and Article 25 of the Constitution. The federal government is taking zakat on compulsory basis from all individuals and companies under Zakat and Ushr Ordinance. The purpose of the Income Support Levy is to favour the poor and needy. The goal can be achieved through zakat collected by the state. Where the zakat fund is being utilised has not been disclosed by the state. Such a non-disclosure is against the Article 19A of the Constitution. The federal government must explain where the revenue is being spent before putting the burden of a new levy on the individuals.
It has been argued that the levy is to be recovered from persons who are paying income tax and filing their tax returns. There is no way the FBR can recover levy from persons who are out of the tax net. This alone creates discrimination and taxing further the persons who are already being taxed. The levy is discriminatory in nature as all individuals have not been charged to the said levy but prima facie those who are already in the tax net, sources said. Under the Income Support Levy Act, 2013, the rate of levy payable under this Act shall be 0.5 percent of the net movable wealth exceeding one million rupees. A person who is liable to pay the levy under this Act shall pay the levy along with wealth statement.