Mfarhanonline Business News 
i>Shahnawaz Akhter/i>
KARACHI: Confusion prevailed over change of authority for the collection of sales tax on services from this fiscal year, as modalities between the Federal Board of Revenue (FBR) and the Sindh government is yet to be finalised, analysts said on Friday.
The taxpayers feared that huge amount of refund would be stuck up with the authorities in the absence of mechanism. They also said that the present system is working on an automated system and in case the provincial government failed to do so then it would invite corrupt practices by the officials.
"Conflict will arise over issuance of refunds against adjustment by various authorities," said Ali A Rahim, a senior tax analyst.
"There should be modus operandi for the collection of sales tax on services," he added. The corporate entities would find it difficult to claim refunds against the inputs and outputs in a scenario when their head offices are in the capital, but their deduction made in the cities of the provinces.
The taxpayers said that huge refunds were already stuck up with the revenue body, hampering business activities by reducing availability of the liquidity.
"The change in the authority would create problems for them," a taxpayer said.
The provincial assembly had unanimously passed the Sindh Sales Tax on Services Bill, 2011, which authorised the provincial government to levy and collect sales tax on services and utilise it from July.
The main services, which would be collected by the provincial government are telecommunication, hotels, lawns, marriage halls, clubs and caterers, advertisement, property developers, banking and insurance companies.
A senior official at the FBR said that the Sindh government would levy this year (FY12) and the provincial government and the federal revenue body had finalised the modalities.
"The mechanism would be notified in the coming days," said Khawar Khursheed Butt, Member Inland Revenue, FBR.
The provincial government has estimated Rs25 billion under this head during the current fiscal year. However, it would shrink the size of an expected Rs1,952 billion federal tax collection.
"The federal government would revise the tax collection target accordingly," said Butt.
The Sindh government for the last several years had called for collection of sales tax on services as the Constitution 1973 empowered the provinces to do so, but the federal government is collecting it on behalf of the provincial governments, saying that the provinces lack infrastructure.
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