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Part VI: Finance, Property, Contracts and Suits

Chapter 1: Finance.

160 National Finance Commission.
(1) Within six months of the commencing day and thereafter at intervals not exceeding five years, the President shall  356 constitute a National Finance Commission consisting of the Minister of Finance of the Federal Government, the Ministers of Finance of the Provincial Governments, and such other persons as may be appointed by the President after consultation with the Governors of the Provinces.
 
(2) It shall be the duty of the National Finance Commission to make recommendations to the President as to-
(a) the distribution between the.Federation and the Provinces of the net proceeds of the taxes mentioned in clause (3);
(b) the making of grants-in-aid by the Federal Government to the Provincial Governments;
(c) the exercise by the Federal Government and the Provincial Governments of the borrowing powers conferred by the Constitution; and
(d) any other matter relating to finance referred to the Commission by the President.
 
(3) The taxes refer red to in paragraph (a) of clause (2) are the following taxes raised under the authority of  357[Majlis-e-Shoora (Parliament)] 357, namely: -
(i) taxes on income, including corporation tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund;
 358[
(ii) taxes on the sales and purchases of goods imported, exported, produced, manufactured or consumed;
] 358
(iii) export duties on cotton, and such other export duties as may be specified by the President;
(iv) such duties of exercise as may be specified by the President; and
(v) such other taxes as may be specified by the President.
 
 359[
(3A) The share of the Provinces in each Award of National Finance Commission shall not be less than the share given to the Provinces in the previous Award.
 
(3B) The Federal Finance Minister and Provincial Finance Ministers shall monitor the implementation of the Award biannaully and lay their reports before both Houses of Majlis-e-Shoora (Parliament) and Provincial Assemblies.
 
] 359
(4) As soon as may be after receiving the recommendation, of the National Finance Commission, the President shall, by  360 Order, specify, in accordance with the recommendations of the Commission under paragraph (a) of clause (2), the share of the net proceeds of the taxes mentioned in clause (3) which is to be allocated to each Province, and that share shall be paid to the Government of the Province concerned, and, notwithstanding the provision of Article 78 shall not form part of the Federal Consolidated Fund.
 
(5) The recommendations of the National Finance Commission, together with an explanatory memorandum as to the action taken thereon, shall be laid before both Houses and the Provincial Assemblies.
 
(6) At any time before an Order under clause (4) is made, the President may, by Order, make such amendments or modifications in the law relating to the distribution of revenues between the Federal Government and the Provincial Governments as he may deem necessary or expedient.
 
(7) The President may, by Order, make grants-in-aid of the revenues of the Provinces in need of assistance and such grants shall be charged upon the Federal Consolidated Fund.
 
 
161 Natural gas and hydro-electric power.
 361[
(1) Notwithstanding the provisions of Article 78,-
(a) the net proceeds of the Federal duty of excise on natural gas levied at well-head and collected by the Federal Government and of the royalty collected by the Federal Government, shall not form part of the Federal Consolidated Fund and shall be paid to the Province in which the well-head of natural gas is situated;
(b) the net proceeds of the Federal duty of excise on oil levied at well-head and collected by the Federal Government, shall not form part of the Federal Consolidated Fund and shall be paid to the Province in which the well-head of oil is situated.
 
] 361
(2) The net profits earned by the Federal Government, or any undertaking established or administered by the Federal Government from the bulk generation of power at a hydro-electric station shall be paid to the Province in which the hydro-electric station is situated.Explanation -For the purposes of this clause "net profits" shall be computed by deducting from the revenues accruing from the bulk supply of power from the bus-bars of a hydro-electric station at a rate to be determined by the Council of Common Interests, the operating expenses of the station, which shall include any sums payable as taxes, duties, interest or return on investment, and depreciations and element of obsolescence, and over-heads, and provision for reserves.
 
 
162 Prior sanction of President to Bills affecting taxation in which Provinces are interested.
No Bill or amendment which imposes or varies a tax or duty the whole or part of the net proceeds whereof is assigned to any Province, or which varies the meaning of the expression "agricultural income" as defined for the purpose of the enactments relating to income-tax, or which affects the principles on which under any of the foregoing provisions of this Chapter moneys are or may be distributable to Provinces, shall be introduced or moved in the National Assembly except with the previous sanction of the President.
 
163 Provincial taxes in respect of professions, etc.
A Provincial Assembly may by Act impose taxes, not exceeding such limits as may from time to time be fixed by Act of  362[Majlis-e-Shoora (Parliament)] 362, on persons engaged in professions, trades, callings or employments, and no such Act of the Assembly shall be regarded as imposing a tax on income. Miscellaneous Financial Provisions
 
164 Grants out of Consolidated Fund.
The Federation or a Province may make grants for any purpose, notwithstanding that the purpose is not one with respect to which  363[Majlis-e-Shoora (Parliament)] 363 or, as the case may be, a Provincial Assembly may make laws.
 
165 Exemption of certain public property from taxation.
(1) The Federal Government shall not, in respect of its property or income, be liable to taxation under any Act of Provincial Assembly and, subject to clause (2), a Provincial Government shall not, in respect of its property or income, be liable to taxation under Act of  364[Majlis-e-Shoora (Parliament)] 364 or under Act of the Provincial Assembly of any other Province.
 
(2) If a trade or business of any kind is carried on by or on behalf of the Government of a Province outside that Province, that Government may, in respect of any property used in connection with that trade or business or any income arising from that trade or business, be taxed under Act of  365[Majlis-e-Shoora (Parliament)] 365 or under Act of the Provincial Assembly of the Province in which that trade or business is carried on.
 
(3) Nothing in this Article shall prevent the imposition of fees for services rendered.
 
 
 366[
165A Power of Majlis-e-Shoora (Parliament) to impose tax on the income of certain corporations, etc.
(1)  367[Majlis-e-Shoora (Parliament)] 367 has, and shall be deemed always to have had, the power to make a law to provide for the levy and recovery of a tax on the income of a corporation, company or other body or institution established by or under a Federal law or a Provincial law or an existing law or a corporation, company or other body or institution owned or controlled, either directly or indirectly, by the Federal Government or a Provincial Government, regardless of the ultimate destination of such income.
 
(2) All orders made, proceedings taken and acts done by any authority or person, which were made, taken or done, or purported to have been made, taken or done, before the commencement of the Constitution (Amendment) Order 1985, in exercise of the powers derived from any law referred to in clause (1), or in execution of any orders made by any authority in the exercise or purported exercise of powers as aforesaid, shall, notwithstanding any judgment of any court or tribunal,including the Supreme Court and a High Court, be deemed to be and always to have been validly made, taken or done and-shall not be called in question in any court, including the Supreme Court and a High Court, on any ground whatsoever.
 
(3) Every judgment or order of any court or tribunal, including the Supreme Court and a High Court, which is repugnant to the provisions of clause (1) or clause (2) shall be, and shall be deemed always to have been, void and of no effect whatsoever.
 
 
] 366

Notes

356   For the notification constituting the National Finance Commission, see Gazette of Pakistan, 1974, Extraordinary, Part II, pages 191-192.
357   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".
358   Substituted by Constitution (Fifth Amendment) Act, 1976 (62 of 1976), Section 3 (with effect from September 16, 1976) for :
(ii) taxes on sales and purchase;
359   Inserted by Constitution (Eighteenth Amendment) Act, 2010, Section 59 (with effect from April 19, 2010).
360   For such Order, see the Distribution of Revenues and Grants-in-Aid Order, 1975 (President's Order No.2 of 1975).
361   Substituted by Constitution (Eighteenth Amendment) Act, 2010, Section 60 (with effect from April 19, 2010) for :
(1) Notwithstanding the provisions of Article 78 the net proceeds of the Federal duty of excise on natural gas levied at well-head and collected by the Federal Government, and of the royalty collected by the Federal Government, shall not form part of the Federal Consolidated Fund and shall be paid to the Province in which the well-head of natural gas is situated.
 
362   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".
363   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".
364   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".
365   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".
366   Inserted by Constitution (Amendment) Order, 1985 (President's Order No. 11 of 1985), Art 2 (with effect from February 24, 1985).
367   Substituted by Revival of Constitution of 1973 Order, 1985 (President's Order No. 14 of 1985), Art 2, Sch. item 1 (with effect from March 2, 1985) for "Parliament".

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