01 / ANALYSIS
Overview of the Case
This matter concerns constitutional petitions challenging the vires of Serial No. 14 of Schedule 2 to the Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, on the grounds that it encroaches upon the federal legislative domain regarding the taxation of goods under Entry 49 of the Constitution. The key principle laid down is that the Federal Constitutional Court is the exclusive apex forum for determining the vires of legislation and interpreting the Constitution, superseding previous jurisdictional arrangements.
02 / ANALYSIS
Brief Facts
Matracon Pakistan and other construction contractors received show-cause notices from the Khyber Pakhtunkhwa Revenue Authority demanding sales tax on consideration received under construction contracts for the period July 2021 to April 2022. The amounts invoiced under the contracts included materials as well as construction services. The contractors questioned the tax treatment of those combined payments and challenged the provincial legislative provision under which the demands were issued. The dispute moved through the tax-reference proceedings and the Peshawar High Court before reaching the Federal Constitutional Court.
03 / ANALYSIS
Questions of Law
- Is Serial No. 14 of Schedule 2 to the Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, ultra vires the Constitution of the Islamic Republic of Pakistan 1973?
- Does the Federal Constitutional Court have the jurisdiction to adjudicate tax references that involve a substantial question of constitutional interpretation?
04 / ANALYSIS
The Court's Answers
Is Serial No. 14 of Schedule 2 to the Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, ultra vires the Constitution of the Islamic Republic of Pakistan 1973?
Answer. No. The impugned provision was held to be within the province's legislative competence concerning services.
“In view of the foregoing discussion, leave to appeal is refused and the instant petitions are hereby dismissed. The impugned judgment of the Peshawar High Court dated May 13th, 2025 is affirmed.”
Does the Federal Constitutional Court have the jurisdiction to adjudicate tax references that involve a substantial question of constitutional interpretation?
Answer. Yes. Article 175E(5) permits the Court to take up a case involving a substantial question of constitutional interpretation even where the underlying proceedings are tax-related.
“The use of the unqualified expression any case thus necessarily includes cases in which this Court may not otherwise have jurisdiction, provided that the jurisdictional trigger, namely, the involvement of a substantial question of constitutional interpretation, is satisfied.”
05 / ANALYSIS
Practical Relevance
Construction-sector taxpayers should distinguish taxable services from goods and examine the adjustment mechanism in the statutory scheme. Constitutional challenges must identify the actual legislative field being taxed.