The National Assembly of Pakistan, vide The Finance Act 2013, added S. 236D to the Income Tax Ordinance 2001 whereby which, 5% advance tax is to be charged on various functions including, and especially, weddings. The state over the last few years – both on a federal and provincial level (Punjab) – has felt an urgent need to interfere in the private domain of its citizens, weddings being their favourite subject of interest. This raises the question whether the government of a free market state should impose socialist laws and furthermore, should the state levy tax under the Income Tax Ordinance for events which have no money generation or income potential for the individual hosting the event.
The latest in a series of laws enabling the state to interfere with the individual’s right to marry on his or her own terms is S. 236D. It is pertinent to mention here that the first in a series of laws leading to S. 236D was the Marriage Functions (Prohibition of Ostentatious Displays and Wasteful Expenses) Ordinance 1998, which amusingly restricted the citizens’ right to offer their guest more than one main course at a wedding and limited the time till which a wedding function could go on, i.e. 10 pm. If one is to give a bare perusal to sub-para 1 of the Article 14 of the Constitution of the Islamic Republic of Pakistan – which states that, “The dignity of man and, subject to law, the privacy of home, shall be inviolable” – one would conclude that all matters of an individual’s private life short of criminal offences cannot be policed by the state, whether they are relations with family members, how one conducts the affairs of his or her household and of course who one chooses to marry, how one chooses that marriage ceremony to be like, how many guest one would want to invite, what the venue or the time of the function would be and what food would be served, etc. These are issues and questions which a reasonable person would assume to be not only beyond the reach of the state in light of Article 14 but also so trivial in nature that the state would not prefer to directly interfere. However the federal and provincial governments have had a different idea. Furthermore, as has been defined by the august Supreme Court of Pakistan in a number of landmark judgments, the right to life guaranteed under Article 9 of the Constitution includes one’s pursuit to happiness and the ability to live freely and enjoy the amenities of life.
However the question at hand is not only of state interference but also of taxation. The federal government levies a 17% General Sales Tax (GST) on the sale of a large number of products and services, including marriage halls, marquees and all marriage and wedding related services and products. Therefore if one is spending Rs. 100,000 on a wedding, the GST levied would be Rs. 17,000. The process of collection derived by the Federal Board of Revenue (FBR) is that the individual will pay the marquee or hall management the entire Rs. 117,000 out of which the hall management will keep its Rs. 100,000 and will submit the GST amount along with their Sales Tax Return to the Sales Tax Department. However, corrupt practices being corrupt practices, the business owners – whether they be from the wedding/ marriage industry or any other industry especially belonging to the Small and Medium Enterprise (SME) segment and dealing primarily in cash – end up not submitting the amount collected as GST with either the department’s collusion or at their own risk of facing investigation and prosecution.
Once again, a reasonable person would assume that the state would introduce methods to ensure that GST is collected from the vendors and service providers and that the citizens’ hard earned money does not go into corrupt pockets. A recent example of such a method has been the ‘online receipt tracking’ of the restaurant bills and receipts, known as the Restaurant Invoice Monitoring System (RIMS) set up by the Punjab Revenue Authority (PRA) to ensure Provincial GST collection from the restaurant and hotel industry. Although the RIMS system is currently operational in Lahore, it does hold promise.
Another more basic method which was introduced earlier in the last decade on both a provincial and federal level was encouraging patrons to opt for computer generated receipts instead of hand written receipts in order to ensure transparency and restrict the scope of tampering of records.
In the case at hand however, for reasons better known to the federal government and the National Assembly where, instead of devising methods to deal with the issue of non-submission of GST returns and corrupt practices both within the FBR and in the wedding industry, vide the Finance Act 2013 a further 5% of advance tax has been levied on functions.
Subsection 1 of S. 236D states:
“(1) Every prescribed person shall collect advance tax at the rate specified in Division XI of Part IV of the First Schedule on the total amount of the bill from a person arranging or holding a function in a marriage hall, marquee, hotel, restaurant, commercial lawn, club, a community place or any other place used for such purpose.”
Furthermore subsection 2 states:
“(2) Where the food, service or any other facility is provided by any other person, the prescribed person shall also collect advance tax on the payment for such food, service or facility at the rate specified in Division XI of Part IV of the First Schedule from the person arranging or holding the function.”
Therefore, not only is the wedding hall or marquee required to charge the 5% tax but also all the other service providers connected with the function, be it wedding planners, florists, caterers, etc. Furthermore, in a clarification provided by the FBR, the 5% advance tax is to be levied on the billed amount including the GST, therefore if we use the example mentioned above, 5% would be levied not on Rs. 100,000 but on Rs. 170,000. Interestingly, the method of recovery provided by the FBR is the same one used for GST recovery, thus keeping the above-mentioned issues intact.
To conclude, the marriage and wedding industry in Pakistan is a multi-billion rupee industry, directly and indirectly engaging several other businesses, fashion and apparel, and food and catering, to name a few. Being a lucrative high revenue industry, it is subject to taxation both in the forms of income tax and general sales tax. However, tax recoveries from this sector are woefully low and to add to the miseries of the individuals availing these services, a further 5% advance tax has been levied which applies not to the industry but to its patrons and costumers as the state has decided to levy income tax on events and functions which have no income generation capacity.
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