KARACHI: The Pakistan Banks Association claimed on Tuesday that the Federal Board of Revenue (FBR), in violation of the constitutional provisions and article 8 of the 7th NFC award, is issuing notices to banks for levy of 16 per cent Federal Excise Duty (FED) on banking services, in addition to sales tax imposed by the respective provinces on the same services.

“As the matter has been lingering since 2011, it needs an amicable resolution, as levying of both taxes will unduly burden the citizens,” said the PBA in its recommendations for Federal Budget 2016-17.

It said the amendment in Sales Tax Rules 2006, additional sales tax at the rate of 5pc was imposed, over and above the sales tax of 17pc on electricity and gas bills, on unregistered persons.

“Banks are registered persons, but most of its branches are rented and utility connections are in name of the landlords. It is recommended that this additional sales tax should not be charged to a bank’s branch and exemption should be provided.”

The PBA also proposed that the definition of the term ‘supply’ in section 2 of the Sales Tax Act, 1990, should be amended to exclude all transactions under Islamic mode of financing from the ambit of sales tax on goods.

At present, only Murabaha transactions are excluded.

The PBA has recommended that the rampant practice of money whitening under the umbrella of Protection of Economic Reforms Act (PERA) should be stopped.

“Section III (4) of Income Tax Ordinance 2001 be deleted and (1992) amended by excluding all persons resident in Pakistan, as these sections provide immunity to a tax payer on source of amount remitted from abroad in foreign exchange through banking channels.”

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