President Asif Ali Zardari has affirmed the Sindh Revenue Board’s (SRB) legal authority to impose and collect the Workers’ Welfare Fund (WWF) in Karachi, rejecting the Federal Board of Revenue’s (FBR) appeal against a ruling by the Federal Tax Ombudsman (FTO).
The decision upholds the FTO’s earlier directive, which declared that the FBR had no jurisdiction over WWF collection in Sindh, as the matter falls under provincial authority following the 18th Constitutional Amendment. The case stemmed from a complaint by Saeed Iqbal, proprietor of M/s Firm Packages, Karachi, who challenged the imposition of WWF liability amounting to Rs92,453 for Tax Year 2020 under the Income Tax Ordinance 2001.
Iqbal argued that WWF should be collected by the SRB, not the FBR, as per the Sindh WWF Act 2014. Despite his response, tax authorities imposed the liability without addressing his objections. The FTO ruled the move illegal, citing that WWF is governed by a separate ordinance and cannot be imposed under Section 221 of the Income Tax Ordinance.
The FBR appealed to the President, contending that WWF collection remains under federal jurisdiction until a mutually agreed mechanism is developed, based on a Council of Common Interests (CCI) decision. However, President Zardari rejected this argument, stating that neither the CCI nor FBR can override the Constitution.
The ruling reinforces provincial control over WWF collection, emphasizing that the Supreme Court has already determined WWF as a fee, not a tax, making federal amendments through Finance Acts 2006 and 2008 unconstitutional.
With the President’s decision, the FBR must comply with the FTO’s directives, directing the Member-IR Policy to issue a clarification and requiring the Commissioner-IR, RTO-1 Karachi, to revisit the tax assessment order. The case highlights the ongoing jurisdictional disputes between federal and provincial tax authorities following the 18th Amendment.
