KARACHI: An appellate bench of High Court of Sindh (SHC) comprising Justice Munib Akhtar and Justice Abdul Malik Gaddi declared the Federal Excise Act as ultra vire of the Constitution and that after 18 th amendment, levy of tax on services is the exclusive domain of the provinces.
The declaration came in a common judgment in more than 150 constitution petitions filed by different service providers including shipping lines, beauty parlours associations, marriage hall associations etc challenging dual taxation one by the federal government and another by the provincial government under Sindh Sales tax on Services Act 2011.
The issue in these petitions is that where lies the legislative competence to impose a fiscal levy (whether tax or duty) on the rendering or providing of services? Does it lie solely with the
Federation, which presently levies a duty in terms of the relevant provisions of the Federal Excise Act, 2005 (“2005 Federal Act”)? Or does it vest only in the Provinces, where a tax is levied in terms of their respective statutes, being here the Sindh Sales Tax on Services Act, 2011 (“2011 Provincial Act”)? Or, as some have contended before us, does the taxing power vest simultaneously yet exclusively in both the Federation and the Provinces? Or (finally) is it that the taxing power is common and concurrent?, The bench observed while encompassing the different aspects of controversies in these suits, The bench after discussing the arguments advanced by the respective sides in its judgment said that. It is declared that on account of the 18th Amendment to the Constitution (which took effect from 19.10.2010) the Provinces alone have the legislative power to levy a tax on the rendering or providing of services, but this is subject to Article 270 AA (7) of the Constitution (as substituted by the said Amendment), and by reason thereof the legislative competence has manifested in the Province of Sindh from 01.07.2011 onwards, the date on which the Sindh Sales Tax on Services Act, 2011 came into force.
The bench further held that Sindh Sales Tax on Services Act, 2011 is validly enacted and ultra vires the Constitution.
The bench however in respect of shipping agents and marine services held that the provisions of the Sindh Sales Tax on Services Act, 2011 as relate to shipping agents etc. (being clauses (47), (80), (82) and (89) of s. 2 and heading Nos. 9805.1000, 9805.2000, 9805.2100 and 9805.3000 of the First and Second Schedules thereof) are ultra vires the Constitution, being a direct encroachment on the exclusive federal taxing power contained in entry No. 53 of the Federal Legislative List in entry No. 53 of the Federal Legislative List.
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