Dr. Ikramul Haq
Lawmakers in Pakistan derive their legislative powers from the Constitution of Islamic Republic of Pakistan [“the Constitution”]. Any kind of legislation that includes imposition of levy of any tax, duty, fee, cess etc having extraterritorial impact and involving entities operating on trans-provincial levels by any provincial assembly is patently against Article 141 of the Constitution. In the same manner, any legislative action encroaching upon the rights of provinces by the National Assembly/Senate in violation of Article 142 of the Constitution will be ultra vires of the supreme law of land, hence, void ab initio.
In the wake of Constitution (Eighteenth Amendment) Act, 2010 [commonly known as the 18th Amendment, received the President’s assent on April 19, 2010], the promulgation of the Sindh Workers Welfare Fund Act, 2014, Punjab Workers Welfare Fund Act, 2019, Khyber Pakhtunkhwa Worker’s Compensation Act, 2013, and any other law by any provincial assembly having extraterritorial effect need to be revisited in the light of Article 141 of the Constitution, which reads as under:
Extent of Federal and Provincial laws
141. Subject to the Constitution, Majlis-e-Shoora (Parliament) may make laws (including laws having extra-territorial operation) for the whole or any part of Pakistan, and a Provincial Assembly may make laws for the Province or any part thereof.
[underlined for emphasis]
The Supreme Court of Pakistan in Messers Sui Southern Gas Ltd & Others v Federation of Pakistan & Other 2018 SCMR 802 explained the post-Eighteenth Amendment position vis-à-vis legislative competence of federation and federating units as under:
The Islamic Republic of Pakistan is a democratic State (Federation) with its Federating Units (Provinces) and the Constitution of the Islamic Republic of Pakistan, 1973 (Constitution) recognizes and creates a balance between the authority of the Federation and the autonomy of the Provinces, which recognition has been given an iron cladding by virtue of the Eighteenth Amendment, passed vide the Constitution (Eighteenth Amendment) Act, 2010. This Amendment to the Constitution has inter alia introduced a drastic enhancement in the legislative authority of the Provinces by deleting the Concurrent Legislative List (CLL), whereby previously both the Parliament and the Provincial legislatures could legislate on the subjects enumerated therein. The omission of the CLL, left only a single Legislative List in the Constitution which exclusively lists subjects that can be legislated upon by the Parliament alone, and by virtue of Article 142(c) of the Constitution any subject not enumerated in these two lists would subject to the Constitution, be within the legislative competence of the Provinces.
The Supreme Court, in the above judgement categorically held that “….in terms of Article 141 of the Constitution, a Provincial Legislature does not possess extra-territorial legislative competence and therefore, cannot legislate with regard to a subject which in its application has to transcend the provincial boundaries”.
While dealing with any subject assigned/devolved to provinces relating to extraterritoriality and trans-provincial establishment, the Supreme Court also held as under:
“(1) the Federal Legislature has extra-territorial authority but no such extra-territorial authority has been conferred to the Provincial Legislature by the Constitution;
(2) the Federal legislature does, but the Provincial Legislature does not have legislative competence to legislate to regulate the trade unions functioning at trans-provincial level”.
The Supreme Court further observed in as under:
“We are in agreement with the observation made by the learned High Court that though in a Federal system, provincial autonomy means capacity of a province to govern itself without interference from the Federal Government or the Federal legislature, but as the Provincial legislature does not possess extra-territorial legislative authority i.e. it cannot legislate regarding the establishments operating beyond the territorial boundaries of that province”.
[underlined for emphasis]
In terms of Article 189 of the Constitution, the above principles settled by the Supreme Court, including any obiter dictum related thereto, as explained in Shahid Pervaiz v Ejaz Ahmad and others 2017 SCMR 206 are to be implemented by all organs of the State, including the provincial assembles.
The provincial assemblies therefore cannot enact any law that is extra-territorial in its application, for example imposing labour related beneficial laws or sales tax on services vis-à-vis entities having trans-provincial operations as well as on services not performed or rendered within their geographical boundaries. Since their inception, the Sindh Revenue Board (SRB), Punjab Revenue Authority (PRA), Khyber Pakhtunkhwa Revenue Authority (KPRA) and Balochistan Revenue Authority (BRA) have unconstitutional laws taxing services both at origination and termination as well as on entities having trans-provincial operations.
Applying the principle(s) established by the Supreme Court in 2018 SCMR 802, the collection of sales tax on services in terms of Entry 49, Federal Legislative List, Part I, Fourth Schedule to the Constitution, which is in the domain of provincial assemblies after the 18th Amendment, cannot be:
- In respect of any services rendered or performed beyond the territorial boundaries of a province; and
- In respect of any entity operating at trans-provincial level.
It is thus imperative for all the four provinces to delete in their laws, on whatever subject, all such provisions that do not conform to the above. All such provisions, if persist, can be challenged in respective High Courts by entities operating on trans-provincial level, and/or not rendering/performing services within a province that is demanding the same on origination as well as termination amounting to extraterritorial effect of law that is ultra vires in terms of Article 141 and other reasons contained in 2018 SCMR 802.
Since the taxpayers operating on trans-provincial level keep on receiving notices from the Federal Board of Revenue (FBR) and provincial revenue authorities (SRB, PRA, KPRA and BRA) in respect of labour-related laws and services rendered and performed within various territories, it is imperative that the matter may be referred by all the governments to the Supreme Court of Pakistan, as it has exclusive jurisdiction in the matter under Article 184(1) & (2) of the Constitution providing as under:
Original Jurisdiction of Supreme Court
184. (1) The Supreme Court shall, to the exclusion of every other Court, have original jurisdiction in any dispute between any two or more Governments.
Explanation.-In this clause, “Governments” means the Federal Government and the Provincial Governments.
(2) In the exercise of the jurisdiction conferred on it by clause (1), the Supreme Court shall pronounce declaratory judgments only.
The authoritative declaratory judgement of Supreme Court in the matter will settle the present tug of war between the federal and provincial governments providing certainty to taxpayers as to where they should pay their tax and to the revenue authorities to issue notices strictly as per supreme law of the land.
The writer, Advocate Supreme Court and writer, is Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE)