Shariah compliant finance is an important part of life for the faithful. Currently, Shariah-compliant financial products are available to both Muslims and non-Muslims around the globe. Hence, all consumers should have the opportunity to take up these products without facing undue regulatory barriers. Consequently, regulatory framework, including taxation, of Shariah compliant products should apply equally regardless of the faith of provider or consumer.
State bank of Pakistan is currently regulating the Islamic banking Mechanism through various regulatory instruments of law which includes circulars, etc, hence, alignment of other laws is required for a good framework for the correct interpretation of Shariah compliant products which ought to be based on the principle of concordare leges legibus est optims interpretandi modus – to make laws agree with laws is the best mode of interpreting them. Moreover, the law should be so amended to include the nature of contract instead of the types of contract because of the fact that contractus regit actum – contract governs the act.
This article is an endeavor to suggest a principle based framework for Shariah compliant financial products and will try to encompass various aspects of the nature of existing Shariah compliant financial products. This includes effect of laws relating to property including motor vehicle, transfer of property, registration of property, stamp duty, hence, will not only be restricted to Income Tax Ordinance, 2001 and Sales Tax Act, 1990. The suggestion in this article is based on the concept that leaving the issue unresolved would amount to maihemium est inter criminia majora minimum, et inter minora maximum – mayhem [chaos] is the least of great crimes and the greatest among small.