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Revenue Board rejects move to levy CED on service providers

ISLAMABAD (May 22 2004): The Central Board of Revenue (CBR) has turned down a budget proposal prepared by sales tax department to impose central excise duty (CED) on professional service providers in budget 2004-2005.

Senior officials engaged in finalising budget told this correspondent here on Friday that tax officials proposed levy of CED on the professionals on the pretext that imposition of general sales tax (GST) on professional service providers needs consensus of all the four provinces, prior to enactment of the law. However, the CBR has the authority to levy excise duty under the central excise law without consulting provinces.

But, tax managers said that the excise duty was levied on doctors in 1995, which proved to be a total failure, as CBR did not collect even a single penny from the levy and ultimately had to rescind the notification.

Taking into account all aspects including implications of the proposed levy, the CBR policy makers have rejected the proposal at the very onset, as central excise duty will be gradually phased out.

Details revealed that the sales tax department drafted a proposal regarding imposition of excise duty at the rate of 5-10 percent on professionals including doctors, medical practitioners/consultants, tax consultants, chartered accountants, cost accountants and lawyers.

The rationale behind the proposal was the slow pace of finalising list of service providers to be brought under GST net in consultation with provinces.

The 'working group' on extension of GST net, in consultation with the provinces and various departments including CBR, has convened a number of meetings for broadening the tax base. Provinces have submitted their respective lists to the working group, which is devising mechanism to bring more service providers into the GST regime. However, no decision has been taken so far by the working group in this regard.

The CBR recently chalked out an action plan for the provinces to effectively control the non-compliance by the services' sector through monitoring by the local administration and provincial excise departments.

The CBR will provide data/technical support on the service providers to the provinces for enforcement of Sales Tax Act, 1990, while provincial governments will approach the representative associations, thus ensuring compliance by the potential service providers.

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