Despite censure, PA passes bill to levy tax on leased, rented properties

Amid protest by the opposition, the Sindh Assembly on Wednesday passed through majority vote the Sindh Sales Tax on Services (Amendment) Bill 2018 to levy general sales tax on movable or immovable property if it is rented or leased out.

A rare show of unity in the House was demonstrated by the opposition lawmakers who had joined the Pak Sarzameen Party (PSP) after deserting their parent political parties – mostly the Muttahida Qaumi Movement (MQM) – and by legislators of the MQM-Pakistan to protest against the bill that would come into retrospective effect from July 1, 2015.

Parliamentary Affairs Minister Nisar Khuhro, who presented the bill, said that under the proposed law, building owners would pay three per cent annual sales tax if they rent out their properties.

Section 3 of the bill’s draft inserts the following amendment in Section 84 of the Sindh Sales Tax on Services Act 2011: “Provided that the levy and collection of sales tax on renting of immovable property services on any date on or after the first day of July 2015 shall be deemed to be and shall always be deemed to have been validly levied and collected, notwithstanding anything contained in this Act or any law for the time being in force or any judgment, decree or order of any court.”

The House witnessed an exchange of heated words between the parliamentary affairs minister and the MQM-P’s Mohammad Hussain at the time the bill was passed through majority vote.

The opposition lawmakers belonging to the MQM-P and the PSP said sales tax should not be levied on all the buildings rented out and as such tax should be imposed only on rented buildings used for commercial purposes.

Hussain said the bill discriminates against Sindh’s urban region, as its residents are being burdened with excessive taxation. He claimed that it would widen the gulf between residents of the urban and rural parts of the province.

He said Sindh’s cities have virtually been degraded to the status of the desert area of Thar during the tenure of the present government. He also said that despite an expenditure of Rs900 billion as development budget by the provincial administration during the past seven years, no mega project has been completed in any part of the province.

Parliamentary party leader of the MQM-P Syed Sardar Ahmed said that the subject of renting out properties does not fall under the domain of sales tax on services.

Ahmed said the court has already declared that no legislation can be carried out against legitimate public interests, adding that the bill has been drafted on the basis of prejudice, as renting out a house does not come under the definition of commercial activity.

He said that no tax of any kind should be levied on renting houses or properties, as already up to 99 per cent of the provincial sales tax on services are being collected from the urban parts of the province.

Whereas, he added, urban Sindh also accounts for recovery of up to 85 per cent of all taxes generated in the provinces, so people of urban Sindh should not be burdened further by levying more taxes.

Other opposition legislators who expressed their reservations on the bill said taxes should be levied on a uniform basis in all parts of the province, as it is unwise to target only cities for collecting taxes.

The concerned lawmakers said farm lands and lands used for fisheries and other similar agricultural purposes will not be covered under the fresh bill. They said that renting out properties or houses does not constitute any sort of commercial activity on which sales tax could be imposed.

On the protest of the opposition lawmakers in the House, the parliamentary affairs minister clarified that under the new bill, sales tax would be levied only on rented out buildings used for commercial purposes, as all rented properties would not be covered under this law.

This explanation of imposition of sales tax on property was verbally provided by the parliamentary affairs minister during the session of the provincial legislature, but it is apparently not mentioned anywhere in the bill’s draft. Meanwhile, buildings being used for running hostels and boarding houses would not be covered under the new bill.

Security for VIPs

Speaking on her calling-attention notice, Pakistan Muslim League-Functional MPA Nusrat Sehar Abbasi claimed that some 6,000 policemen are deployed across the province to perform security duties for VIPs belonging to the Pakistan Peoples Party.

Nusrat said that annually Rs2 billion are being spent on providing security to VIPs across the province, adding that a total of 10,000 policemen are tasked with protocol duties in Sindh.

She claimed that 50 policemen were deployed to provide security to Faryal Talpur, 10 to Ali Nawaz Mehar, 10 to Umer Rehman Malik, 14 to Sharmila Faruqui, 17 to Javed Nagori, 10 to Rubina Qaimkhani and 12 to Murtaza Wahab.

Responding to the calling-attention notice, Home Minister Suhail Siyal said the claims of the opposition lawmaker were baseless and inaccurate, adding that a private TV channel had wrongly reported that 78 policemen were deployed for his security.

A day earlier the Sindh Assembly had unanimously passed a resolution condemning the Indus River System Authority (IRSA) for “illegally opening” two canals in Punjab despite protest from Sindh, depriving the province of its due share of water.

MPA Nand Kumar Goklani of the Pakistan Muslim League-Functional moved the private resolution in the assembly, and MPAs from both treasury and opposition benches supported it.

“Despite Sindh’s protest and severe crises in the province, Indus River System Authority has illegally opened Chashma-Jehlum Link Canal and Taunsa-Panjnad Canal violating the inter-provincial agreement, depriving Sindh of its rightful water share,” the resolution stated. “This house condemns the attitude of IRSA and demands the authorities concerned in the federal government to take serious notice of it and suspend the water diversion until Sindh gives its consent.”

Speaking on the resolution, Nand Kumar, an opposition MPA, said Sindh had been facing a severe water shortage and the provincial government should raise this issue with the Centre.

He said agricultural land in Sindh, especially in the southern areas, had been virtually transformed into barren land because of shortage of irrigation water, but nobody was willing to raise this issue. He called for a united voice to bring this issue to the federal government’s notice.