KARACHI: The much awaited withdrawal of the federal excise duty (FED) on services, which are now subject to provincial sales tax, has been proposed in the Finance Bill 2016.
In the Finance Bill 2016, services will not be subject to FED include advertisements; shipping agents; franchise services; stock brokers; and Services provided or rendered by banking companies, insurance companies, cooperative financing societies, modarabas, musharikas, leasing companies, foreign exchange dealers, nonbanking financial institutions, asset management companies and other persons dealing in any such services.
In the absence of this proposed amendment, there was a question of duplication of incidence of indirect tax on such services both by federation and provinces.
There had been litigation on this subject and the Sindh High Court has recently resolved the controversy in favor of taxpayers deciding that services, other than shipping agents, taxed by provincial government cannot be subject to FED.
The aforesaid issue was aggravated by the amendment made in the Finance Act, 2015 where the exclusion was made only for telecommunication services.
Experts, however, suggest that there should have been a general provision that FED will not be payable on any service, which has been validly taxed by the provincial government.