Tax broadening measures: Sindh proposes to withdraw ST exemption on various services
June, 18th 2013
Sindh government has proposed to review the exemptions and impose sales tax on services of advertising agents, security agencies, commodity brokers, marriage halls and event management to enhance the tax base without increasing tax rate. The government has also proposed to increase property tax from 20 percent to 25 percent on annual rental value of buildings and lands.
Levying sales tax on services of advertising agents, security agencies, commodity brokers, marriage halls and lawns, event management and public bonded warehouses have been proposed. The services of security agencies will be taxed at 10 percent, instead of the standard rate of 16 percent. While, small marriage halls and lawns located on plots of 800 sq. yds or less will remain exempted from the tax In addition, exemption on internet and broadband services are proposed to be withdrawn. However, Internet services of upto Rs 1,500 per month will remained exempted in order to facilitate students and households.
Certain new services like beauty parlours (exceeding annual turnover of upto Rs 3.6 million) and race clubs are proposed to be brought into the tax net. The beautician services will be taxed at the reduced rate of 10 percent. The Bed Tax of 7.5 percent is proposed to be withdrawn; however, the hotel industry will continue to pay only the Sindh sales tax on their services.
The government has also proposed to increase in license fee of Trade and Import of Potable Liquor and Retail of Liquor License from Rs 600,000 to 800,000 and from 350,000 to 500,000, respectively. According to the budget speech presented by Chief Minister Sindh Syed Qaim Ali Shah, Sindh sales tax is insufficient and limited to few service items and it is not possible to achieve the desirable tax-to-GDP ratio in this sector at the existing tax base.
With a view to supplement the national efforts for achieving the NFC-desired Tax-to-GDP ratio of 15 percent by 2014-15 and also for equitably taxing the service sectors in Sindh, the provincial tax administrations need to be reformed and the tax base needs to be appropriately expanded, he added.
Therefore, the government has proposed that the existing tax anomalies and inequities should be removed and few more of the items in the services sector be brought into the tax net without increasing tax rate He said that Sindh government will not increase the existing sales tax rate of 16 percent to contain inflation.
Some of the services provided under contracts or agreements are proposed to be specified as being liable to sales tax with a view to removing doubts, disputes and confusion about their tax status in view of the fact that tax is already levied on the services of contractual execution of work. These services are specified in the amending provisions of the Bill in relation to the Second Schedule to the Sindh Sales Tax on Services Act, 2011, he informed.
The offer of the Sindh Chapter of the Constructors Association of Pakistan (CAP) to pay Sindh sales tax at a reduce rate of 4 percent without any input tax adjustment is proposed to be accepted. On the pattern of the exemption from tax on the Bank's services of utility bills collection, the similar services by NADRA Technology Limited (NTL) are also proposed to be exempted. The chief minister said that certain legislative arrangements had been proposed with a view to providing clarity and un-ambiguity in law.
In addition, the Special Development and Maintenance of Infrastructure Cess is being levied for the purpose of meeting the costs of wear and tear on the infrastructure due to heavy traffic of the goods entering the province by air or sea, and for providing security. It is proposed to enhance the rate of the Cess from 0.80-0.85 percent to 0.90-0.95 percent on various slabs of the imports to facilitate additional funds to the Government for meeting the cost of maintenance of infrastructure.