By: Zulfiqar Ali
The Food Department issued a notification on April 6, 2026, waiving the amount due to contractors towards General Sales Tax (GST) of over Rs 877.38 crore on transportation services availed for the supply of wheat.
The notification claimed that the Food Department and the contractors came to know about the imposition of sales tax on transportation for the supply of wheat through a letter received from the Accountant General on October 21, 2022.
According to the Food Department notification, since the tenders for the supply of wheat for the financial year 2022-2023 were invited in June 2022, the contracts were invited as per the old procedure, due to which GST was not deducted from the contractors during the financial year 2022-23, but this claim is contrary to reality.
On April 15, the Food Secretary issued an order approving the refund of Rs 23.514 crore of GST deducted from the bills of five contractors in Mirpur division. This amount was deducted from July 2022 to September 2023. Similar orders were also issued for Poonch and Muzaffarabad divisions. The question arises that now the Food Department says that it came to know about the implementation of GST on October 21, 2022, but according to the documents, GST has been deducted from the bills of the contractors since July 2022.
This makes it clear that the Food Department was already aware of the imposition of sales tax. On February 26, 2026, based on the information provided by the Food Department to the Inland Revenue Department, the Secretary Inland Revenue wrote a letter to the Food Department stating: “If it is established that the Food Department did not collect sales tax on services, because it was a valid departmental action adopted in good faith, then the sales tax can be waived under section 65 for the period from July 2019 to October 21, 2022.”
According to the documents, the Food Department neither collected this tax from the contractors nor deducted it from their bills from July 2019 to June 2022. But the Food Department not only waived the tax for these three years but also waived the tax for fifteen months from July 2022 to September 2023, which it had collected, and that amount is now being refunded to the contractors.
The Food Department also ignored the letter from the Inland Revenue Secretary stating that the tax could be waived from July 2019 to October 2022. He made this suggestion because the Food Department took the stand that it came to know about the General Sales Tax in October 2022, which is proven wrong in the light of the documents.
The Food Department did not deposit the collected tax with the treasury because the case was in court. After the tax was waived, the contractors have now withdrawn the case from the High Court.
Food Department officials refer to the recommendations of the Cabinet Committee formed on November 10, 2023 to waive the tax, but why did the coalition government that ended on November 17, 2025 not waive this tax within a period of two years?
In the past, three proposals were considered at the official level on this issue. The first proposal was that the Finance Department provide additional funds so that this tax could be deposited in the government treasury. The second proposal was for recovery of arrears, while under the third proposal, Section 3(2A) of the Azad Kashmir Sales Tax Act 2001 read in conjunction with Section 13(2A) of the Sales Tax Act 1990 could be exempted from tax, provided that there were circumstances such as national security, natural calamities, national food security in emergencies or implementation of bilateral and multilateral agreements.
This is the reason why the two governments of the Pakistan Tehreek-e-Insaf and later the coalition government could not waive this tax because there was no legal justification for it.
The PPP’s decision is the opposite, the Pakistan People’s Party government waived this tax, although there was no such extraordinary situation that could provide legal justification for this decision.
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