Increase font size Decrease font size Reset font size

PHC declares provincial sales tax on internet services legal

Bureau Report 2017-03-10
PESHAWAR: A Peshawar High Court bench has dismissed a petition of the Pakistan Telecommunication Company Limited and declared legal the levy of 19.5 per cent sales tax on the internet services by the Khyber Pakhtunkhwa government through the Finance Act 2013.

Chief Justice Yahya Afridi and Justice Mohammad Ayub Khan ruled that the said sales tax was not discriminatory, unreasonable or disproportionate so as to declare itillegal and without lawful authority or in violation of any provision of the Constitution and the fundamentalrights declared therein.The PTCL through its general manager (revenue account), Khalid Mehmood Chaudhry, had challenged the said tax praying the court to declare the 19.5 per cent tax on internet, email and data services under Serial No. 4 Schedule II of the Khyber Pakhtunkhwa Finance Act 2013 read with Section 19 as irrational, unjustified, illegal, discriminatory, without lawful authority and of no legal effect.

The petitioner had further requested the court to declare the impugned tax liable to be quashed being ultra vires to the provisions of the Constitution.

The bench had reserved its judgment on Feb 15 after completion of arguments by the counsel for the petitioner and respondents.

The court has now pronounced the order and released the detailed judgment.

Babar Shehzad was the lawyer for the petitioner, while Shumail Ahmad Butt and additional advo-cate general Waqar Ahmad Khan represented the Khyber Pakhtunkhwa Revenue Authority and provincial government through the law secretary.

Af ter the petition was filed, the high court had stayed the recovery of the impugned tax from the petitioner and directed the petitioner to deposit the same in a designated account of the high court.

While dismissing the petition, the court vacated the said stay order and directed that the amount deposited by the petitioner with the high court be transferred to the account of director general, Khyber Pakhtunkhwa Revenue Authority.

The petitioner`s counsel had contended that the only purpose of Khyber Pakhtunkhwa legislature was to increase revenue.

He said the purpose had come at the cost of restricting the usage of internet which was a lifeline for students and small businesses in the provincealready ravaged by terrorism and poverty.

The bench ruled that the Constitution (Eighteenth Amendment) Act, 2010, brought in its wake provincial autonomy, vesting more authority in the provinciallegislature.

It added that the domain of the provinciallegislature tolevy sales tax on services was evident from the amendment introduced in Entry 49 of the Federal Legislative List contained in Part I of the Fourth Schedule of the Constitution.

`Now, when we review the impugned provisions of the Finance Act, 2013, it is apparent that the Khyber Pakhtunkhwa Provincial assembly had the legal mandate to legislate and impose the levy of sales tax on internet services impugned in the instant case.

The bench further ruled: `The very spirit of the Constitution, envisages a Federal form of Government, vesting in its feder-ating units with autonomy. This theme of provincial autonomy has now gained such high momentum, as witnessed in the Eighteenth Amendment, whereby the Concurrent List enumerated in the Fourth Schedule of the Constitution was omitted and powers were vested in the Province.

`To agree with the contention of the worthy counsel for the petitioner company would in f act be putting a clog upon the authority of the Provinces, and in particular the Khyber Pakhtunkhwa provincial assembly, which would not be appropriate for this constitutional court to legally endorse,` it added.

The bench ruled that a fiscal statute couldn`t be struck down solely on the ground that the rate of tax levied was unreasonably high and that the provincial autonomy was ingrained in the Constitution and was to be upheld.