World Bank asks Government to rationalize GST

The World Bank has asked Pakistan to secure approval of the Council of Common Interests (CCI) for an integrated general sales tax (GST) regime for goods and services in order to qualify for a $500-million loan for budgetary support.  The Washington-based lender is urging the federal and provincial governments to end distortions in their sales tax regimes, which are currently being operated by five governments and 13 tax authorities across Pakistan.  The 13 tax authorities often do not share data with each other, which undermines tax collection.  “We are cognisant of the constitutional challenges and we are supporting this through the development policy credit,” said World Bank senior country economist Mohammad Waheed.  Waheed said different provinces were applying different principles for the determination of GST on services, which was creating confusion.   “We are proposing that all revenue authorities should agree on a single law, which should decide about single principle of taxation, supply rules and single rate, so that the whole sales tax base is harmonised on the same principles,” said the senior economist.  If a company is working across Pakistan, it is filing 60 sales tax returns but once harmonised, there will be 12 sales tax returns, which can be reduced to four.  “There is also currently a huge compliance gap on the sales tax side, which is around 87% of the collection. The sales tax collection can be doubled to Rs3 trillion by harmonising the system,” said Waheed.

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