Sindh may stop collecting withholding tax on behalf of FBR

The Sindh government is mulling over a decision to stop the provincial excise and taxation department’s motor vehicle registration wings from collecting withholding tax on behalf of the Federal Board of Revenue (FBR).

The decision could be made over the government’s complaint that “the FBR is unilaterally deducting huge funds from the provincial government’s accounts and it is also reluctant to give the money to the government”.

In a meeting held on Thursday, Sindh Chief Minister Syed Murad Ali Shah was told that “the FBR was hardly engaging with the provincial government for returning over Rs8 billion it had unconstitutionally deducted from the provincial government account, as it was not in a mood to refund the money”.

The chief minister said the Sindh government on behalf of the FBR was collecting withholding tax which meant the excise and taxation department was providing the FBR its services against which huge amounts was being consumed from the Sindh government’s account.

Murad asked the relevant official to suggest the FBR that it should set up its counters at the motor vehicles registration wings and collect withholding tax on its own. “We are fed up with their attitude and may be not be able to provide them service anymore,” he said, directing the excise & taxation department to prepare a summary for the cabinet to discuss the matter and decide it once for all.

It may be recalled that from 2012-13 to 2016-17, “the FBR has unilaterally and unconstitutionally deducted over Rs8054.5 million from the provincial consolidated fund account”, the meeting was told.

The meeting was told that the provincial government had been raising the issue of refund at different forums but the FBR seemed to be adamant to only return the deduced money.

The chief minister was told that in 2012-13 “the FBR created an incorrect demand and deducted Rs695.235 million from the provincial account without waiting for reconciliation”. An appeal was filed and the FBR appellate authority itself decided in favour of the Sindh government but the amount had not yet been refunded, the meeting was told.

“In 2014-15, the FBR changed and enhanced the rates of withholding tax on vehicles without waiting for its recovery and arbitrarily deducted Rs86.3 million in advance which is still recoverable.

In 2015-16, the FBR created a demand on the basis of an incorrect news report that the provincial motor vehicle registration wing has registered 1,473,714 vehicles between July 72,015 to April 30, 2016, though only 79,858 vehicles were registered during the said period. The FBR without reconciling the figures unjustifiably deducted RS6,127.1 million,” the meeting was told.

“In 2016-17, the FBR created yet another exaggerated demand on the pretext of recovering more and depositing less amount on account of withholding tax recovered from registered vehicles from May 1, 2016 to June 30, 2016 and without waiting for reconciling the amount unjustifiably took away Rs 294.89 million on June 14, 2017 by coercing the manager of the bank who was maintaining another account of Infrastructure Cess. In 2016-17 the audit of Sindh Accountant General for the year 2011-12 was conducted by the Sindh Auditor General during 2016-17 wherein it transpired that the Sindh AG had failed to recover an amount of Rs76.87 million from vendors of the excise and taxation department. The audit observed that the FBR should recover the amount. Instead of recovering the amount from the vendors, the FBR illegally deducted the said amount from Sindh government account,” the meeting was told.

The chief minister was told that the appeals had been made in the related FBR forums but those appeals had repeatedly been remanded back without any decision and the matter was still pending.