The federal government modified rates of sales tax on different petroleum and oil (POL) products with effect from June 1, 2015 through statutory regulatory order (SRO)-470(I)/2015 dated May 31, 2015, issued under section 3(2)(b) of the Sales Tax Act, 1990. Contrary to the government’s claims, power to grant exemption from taxation or vary rates of goods under the Sales Tax Act, 1990 has not been withdrawn even in the recently-promulgated Finance (Amendment) Ordinance, 2015.

It means that the government through the Federal Board of Revenue (FBR) will keep on playing havoc with sales tax law without seeking the approval of Parliament in utter violation of Article 77 read with Article 162 of the Constitution. Whenever, there is lowering of rates or grating of exemption(s), the sufferers are the provincial governments that would get less than promised shares under Article 160 of the Constitution -- as per National Finance Commission (NFC) Award.

Issuance of 470(I)/2015 also exposed the tall claim made by the finance minister in a press conference held on May 11, 2015, that "through Finance (Amendment) Ordinance, 2015, power of FBR to issue SROs has been withdrawn". He said that such powers were transferred to the Economic Co-ordination Committee of Cabinet [ECC] in "exceptional circumstances". That was only in respect of section 13 of the Sales Tax Act, 1990 granting exemption.

The reality is that under section 3(2)(b) of the Sales Tax Act, 1990, as substituted by the Finance (Amendment) Ordinance, 2015 (Ordinance No. IX of 2015), promulgated on April 30, 2015 by the president, the federal government without approval of EEC or Parliament "may, subject to such conditions and restrictions it may impose, in the official gazette, declare that in respect of any taxable goods, the tax shall be charged, collected and paid in such manner and at such higher or lower rate or rates as may be specified in the notification."

As regards granting exemptions under section 13(1) of the Sales Tax Act, 1990 it is also intact and says: "Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the federal government, be exempt from tax under this Act."

The power to grant exemption under section 13(2)(a) of the Sales Tax Act, 1990, as amended by the Finance (Amendment) Ordinance, 2015, reads as under:

"The Federal Government may, pursuant to the approval of the Economic Coordination Committee of Cabinet, whenever circumstances exist to take immediate action for the purposes of national security, natural disaster, national food security in emergency situations, protection of national economic interests in situations arising out of abnormal fluctuation in international commodity prices, removal of anomalies in taxes, development of backward areas and implementation of bilateral and multilateral agreements."

The above provisions are ultra vires of Article 77 of the 1973 Constitution which clearly ordains that the right to levy taxes is the sole prerogative of the Parliament and in emergent situation when Senate and National Assembly are not in session, it can be done through presidential ordinance subject to conditions laid down in Article 89. No other organ of state can levy taxes or extend concessions/exemptions through delegated powers.

The power to issue exemptions under section 13(2)(a) of the Sales Tax Act, 1990 through SROs given to the federal government with the approval of ECC under "exceptional circumstances" violates the supreme law of the land and dictum laid down by the Supreme Court in Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others[(2013) 108 TAX 1 (S.C. Pak)] which reads as under:

"It is well settled proposition that levy of tax for the purpose of Federation is not permissible except by or under the authority of Act of Majlis-e-Shoora (Parliament). Reference in this behalf may be made to the case of Cyanamid Pakistan Ltd. V. Collector of Customs (PLD 2005 SC 495), wherein it has also been held that such legislative powers cannot be delegated to the Executive Authorities. Also see Government of Pakistan v. Muhammad Ashraf (PLD 1993SC 176) and All Pakistan Textile Mills Associations v. Province of Sindh (2004 YLR 192)." [Page 18, Para 20]

The website of National Assembly shows that till today Finance (Amendment) Ordinance, 2015 has not been presented before the House as required under Article 89(2)(i) of the Constitution. Issuance of such Ordinances amounts to usurping the powers of the Parliament, especially when both Senate and National Assembly are in session near the date when the Ordinance was promulgated.

It is a well-established fact that through SROs the mighty sections of society are provided "legal ways" to amass more and more wealth. According to a report, exemptions and concessions given to them were of Rs5,500 billion in the last 5 years alone as admitted by Chairman FBR before the Senate Standing Committee on Finance and Revenue on May 13, 2014. The glaring examples of abuse of delegated power through SROs reflect in beneficial notifications for sugar and steel industries owned by men in power. Bureaucracy is also beneficiary of these powers e.g. SRO 569(I)/2012 issued on May 26, 2012 providing that government officials in grade 20-22 would pay just 5 per cent tax on their monetised transport allowance as a separate block of income.

The issue of SROs levying taxes or varying tax rates or granting exemptions and concessions has yet not been debated from the constitutional point of view. For cartels possessing enormous money power, reduction of duties and tax concessions by FBR and then extending them by using its executive authority available in the form of SROs, has created innumerable tax distortions in the tax system. The burden of taxes in the wake of such concessions is invariably shifted on the poor.

Pakistan is a unique country where the executive authority can conveniently undo tax laws passed by the Parliament which is gross violation of Article 162 of the Constitution of Pakistan.

Article 162 debars even the National Assembly to grant exemptions without the prior approval of the President, but interestingly, this power has been delegated unconstitutionally to EEC through Finance (Amendment) Ordinance, 2015 in blatant disregard for Article 77 of the Constitution.

One hopes that during the current budget session, the Parliament will take note of this grave and blatant violation of supreme law of the land -- Article 77 read with Article 162 of the Constitution as elaborated by the Supreme Court in Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others [(2013) 108 TAX 1 (S.C. Pak)].