Thank you guys for this useful information but i need explanation of few points given below. Your early response is much awaited.
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Originally Posted by God Fearer
Controversy on Sales Tax:
A peep into revenue distribution history of the sub continent reveals that sales tax was in exclusive domain of provincial governments before 1947. It was partly federalized to the extent of 50 per cent in 1948-49 budget, the first of independent Pakistan, to meet the impact of massive refugee influx in Karachi which was then the federal capital.
it was in 1974 NFC award that sales tax was completely federalized and the noises made in Karachi were ignored. It declared population as the only criterion for distribution of revenue.
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What I know in this context is that as per Govt of India Act 1935 (constitution of Pakistan after independence until we developed our own), Entry 48 List II,7th Schedule, sales tax and advertisement tax was provincial subject. India uptill now retains the same status but seven month after independence, while presenting First Budget in Assembly for fiscal year 1948-49, Finance Minister Ghulam Mohammad declared that direct taxes are not enough for central govt to bear its expenses, therefore it was agreed by provincial assemblies to transfer the collection of sales tax to the centre for two years. Hence for the time being, it was completely transferred to Centre (not 50%, and centre was to pay certain amount in lieu of these taxes). Please correct me if I am wrong...
Later in 1951, Finance Minister further sought extension of two years. West Pakistan agreed with some reservations, East didn't. However, bill was passed by assembly despite serious apprehensions of East Pakistan.
FY 1952-53 was fateful year of provincial autonomy and finances. The constitution was amended and Entry 54 was introduced in List I (Federal Legislative List) and sales tax was permanently made a federal subject (mark this expression) and provinces were left with advertisement tax only.
Again, majority of members of NFC (of both East & West Pakistan) tried to restore the sales tax to provinces in 1962 but in vain.
This is the history of controversy over collection of sales tax. I am afraid, I don't see anywhere the 50% collection by Centre and vice versa....
Quote:
Originally Posted by God Fearer
Of the three commissions that failed, two were formed in 1979 and in 1984 during the military rule of late General Zia-ul-Haq and the third one, the current NFC was formed in the year 2,000 after General Musharraf took over the government in October 1999. This NFC continued functioning after the October 2002 elections with some changes in its composition.
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Another example of the fact that: Worst democracy is better than best dictatorship
Quote:
Originally Posted by God Fearer
The first NFC award was given in 1974 by the elected government of late Z.A. Bhutto. This award set population as the only criterion for revenue distribution among the provinces. Custom duties, the main revenue earner was kept out of the divisible pool and the sales tax was completely federalized.
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Again, what i recall is that the sales tax was already federalised (as already cited) and was retained as the federal subject in ZAB era also by again making an excuse of political unstability after debacle of East Pakistan. However it was promised that certain concessions shall be made to provinces in the coming time. Bottomline is: NFC of 1974 wasn't the first one to completely federalise the sales tax, it just retained the status quo. I humbly seek correction from your side, if any.
Quote:
Originally Posted by God Fearer
7th NFC Awards:[/B]
.........The federal government has agreed to cut tax collection charges from 5.0 per cent to 1.0 per cent and this amount would also be added to the divisible pool. About the thorny issue of sales tax on services, he said the NFC recognised sales tax on services as a provincial subject and it mightbe collected by the respective provinces.
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In the current award it has been decided that sales tax on services would be made provincial subject wheras sales tax on goods would be retained by Islamaabad. Can anyone help me understand the distribution in amount/%age of sales tax on goods and services ?
Although this award won't prove to be a panacea to past grievances of provinces but still, allotting 56.5% (and 57% in next four years) in distribution pool for provinces is a step in the right direction !