SC Declares Karachi Cantonment Board’s Collection of Professional Tax Illegal

Supreme Court of Pakistan has ruled the collection of professional tax from various businesses, including restaurants, banks, and poultry farms, by the Karachi Cantonment Board as illegal. This ruling upholds the earlier decision of the Sindh High Court, which had nullified the Cantonment Board’s collection of professional tax, further instructing them to refund the collected amounts to taxpayers.

The case was heard by a three-member bench, presided over by Chief Justice Faez Isa. Chief Justice Isa emphasized that the imposition of this tax by the Cantonment board was a violation of democratic principles and transparency. He raised questions about the rationale behind permitting commercial activities within Cantonment areas, originally designated for specific military purposes. He expressed concerns over the Cantonment board’s decisions being made by a single individual without adequate consultation or accountability.

Furthermore, Chief Justice Isa noted that government agencies were returning to their designated limits, implying that this decision could set a precedent for other agencies to follow suit.

Professional tax is a provincial levy typically imposed on professionals, traders, and businesses according to their income brackets. However, Cantonment boards in various parts of Pakistan have been collecting this tax within their jurisdictions, asserting that they are not bound by provincial laws.

This practice has led to disputes and legal battles between the Cantonment boards, provincial excise and taxation departments, and taxpayers. Some traders and vendors have raised concerns about being asked to pay the same tax twice by both provincial and Cantonment authorities. They argue that they are not professionals and should not be liable for this tax.

In addition to professional tax, certain Cantonment boards have also imposed other levies, such as conservancy tax and water charges, on residents and businesses in their areas. These additional charges have also faced legal challenges in various courts.