Pakistan: Governments beware

EDITORIAL : Daily Times

The newly elected government of the PML-N has encountered its first taste of judicial activism and embarrassment at having one of the central pillars of the budget 2013-14 knocked out from under its feet. In a five page short order, a three member bench of the Supreme Court (SC) headed by Chief Justice Iftikhar Mohammad Chaudhry has held that the implementation of the one percent increase in General Sales Tax (GST) from 16 percent to 17 percent before the passage of the Finance Bill of which it was a part was null and void and unconstitutional. Similarly, the increase in POL prices as a result of the GST increase was invalid (they have now been withdrawn). The government’s defence before the court that its declaration under Section 3 of the Provisional Collection of Taxes Act 1931 validated the measure imposed since June 13 was struck down by the court for not having the status of either legislation or sub-legislation, therefore without force in law and contrary to Articles 3 (elimination of exploitation), 9 (security of person), 24 (protection of property rights), and 77 (taxes to be levied only by parliament). Also, the additional 9 percent GST being collected on CNG, over and above the prescribed 16 percent rate under the proviso to Rule 20(2)(c) of the Sales Tax Special Procedures Rules 2007 and Section 3 of the Sales Tax Act 1990 was unconstitutional and in violation of the constitutional Articles quoted above as well as Section 3 of the Sales Tax Act. OGRA was directed to issue a revised notification to recover GST at 16 percent on taxable supplies until the Finance Bill was passed by parliament. Regarding the increase in essential commodities’ prices in the wake of the GST increase, the court directed the federal and provincial governments to take action under Sections 6 and 7 of the Price Control and Profiteering and Hoarding Act 1990 (Essential Commodities) to keep prices consistent as per the Sixth Schedule under Section 13(1) of the 1990 Act (Essential Commodities). Further, the court ordered the government to deposit the excess GST collected on POL/CNG or any other taxable supplies since June 13 with the Registrar of the SC, pending the final passage of the Finance Bill by parliament. In the light of the final Bill, the amount would be either returned to the government or appropriate orders passed. The short order has effectively put the budget on hold, at least temporarily. It can only be rescued from the impasse created by the court’s verdict by parliament. In the National Assembly on Friday, on the one hand the combined opposition seemed to be enjoying the government’s discomfiture, albeit in restrained fashion, and on the other hearing voices questioning the parameters of the budget now in the light of the SC verdict (Shah Mehmood Qureshi of the PTI) as well as statesmanlike speeches for parliament to rise to the occasion and settle the matter itself rather than it being settled by other forums (former Speaker Dr Fehmida Mirza of the PPP). After he was free of the Senate session discussing the budget (the Senate made various recommendations), beleaguered Finance Minister Ishaq Dar reiterated on the floor of the lower house that the government would abide by the court’s verdict, at the same time postponing his winding up speech on the budget until Saturday (today). It remains to be seen how the Finance Minister achieves either consensus or at the very least uses the PML-N’s majority in the house to get the GST increase passed or, if it is not, recasts his budget. The gnomes of the finance ministry have advised Dar to ask his detractors on the GST increase to suggest alternatives to generate the Rs 60 billion that would be lost of the measure is not passed. The problem stems from the long-standing practice by successive governments to implement taxation measures even before the Finance Bill passes muster over many years. But what the finance ministry gnomes and their boss forgot was the changed landscape of Pakistan in which they now have to operate. It can no longer be assumed with confidence that just because something has been done for long, it will continue to enjoy immunity from judicial review. The superior judiciary, immeasurably strengthened since its restoration in 2009, has sent a clear message to all governments, incumbent as well as future: Gentlemen, the days of executive privilege over and above the law and constitution are now a thing of the past. You had better therefore pull up your socks and shed complacency derived from such past practices.