President Zardari Upholds Sindh Revenue Board’s Authority Over Workers Welfare Fund Collection

President Asif Ali Zardari has confirmed the Sindh Revenue Board’s (SRB) legal right to levy and collect the Workers’ Welfare Fund (WWF) in Karachi, rejecting the Federal Board of Revenue’s (FBR) appeal against a decision by the Federal Tax Ombudsman (FTO).

The ruling upholds the FTO’s earlier determination, which asserted that the FBR has no jurisdiction over WWF collection in Sindh, as this responsibility has been devolved to the provincial government following the 18th Constitutional Amendment. This legal dispute began with a complaint by Saeed Iqbal, owner of M/s Firm Packages in Karachi, who challenged the WWF liability of Rs92,453 for the Tax Year 2020, claiming it should be collected by the SRB, not the FBR, in accordance with the Sindh WWF Act 2014.

Despite Iqbal’s objections, the tax authorities imposed the WWF liability without considering his concerns. The FTO ruled that the move was unlawful, as the WWF is governed by a separate provincial law and cannot be collected under the Income Tax Ordinance’s Section 221.

The FBR appealed to President Zardari, arguing that WWF collection should remain under federal jurisdiction until a framework is agreed upon, based on a decision by the Council of Common Interests (CCI). However, President Zardari rejected this view, stating that neither the CCI nor the FBR can override the Constitution.

This decision affirms the provincial authority over WWF collection, underscoring that the Supreme Court has already ruled that WWF is a fee, not a tax. Federal amendments to the WWF law made through the Finance Acts of 2006 and 2008 were declared unconstitutional.

In light of the President’s decision, the FBR must comply with the FTO’s orders, instructing the Member-IR Policy to clarify the matter and requiring the Commissioner-IR of RTO-1 Karachi to review the tax assessment. This case illustrates the ongoing tension between federal and provincial tax jurisdictions post-18th Amendment.