KARACHI: Sindh government has reduced the sales tax rate on services rendered in the province to 15 percent from July 01, 2014 with the aim to provide substantial relief to taxpayers and citizens.
The announcement made by Syed Qaim Ali Shah, Chief Minister, Sindh while presenting the provincial budget for 2014/2015 on Friday. The chief minister said that with the tax reform program in the province would increase the revenue collection to Rs200 billion in next three years.
In order to rationalizing the sales tax structure; equating the tax base in Sindh with that in the Punjab and the Khyber Pakhtunkhwa; and removing certain tax anomalies and distortions, the chief minister proposed to levy Sindh sales tax on the services which are already liable to sales tax in other provinces but are not yet taxable in Sindh.
The services are technical, scientific and engineering consultants, tour operator (Hajj and Umrah tour packages shall remain exempt), manpower recruiting agents, share transfer agents, property dealers, fashion designers, interior decorators, rent-a car, automobile dealers, and laundries and dry cleaners.
Three major services, namely the education services mostly in private sector; the services provided or rendered by hospitals, medical and dental practitioners and pathological/radiological/ diagnostic laboratories; and the road transport services, have huge potential for tax revenue-yield but are exempt from the levy of sales tax. Several taxpaying sectors complain of the discriminatory tax treatment on the ground that they pay Sindh sales tax on their service but the aforesaid three major sectors are not taxable. In the budget it is proposed to levy Sindh sales tax at a reduced concessionary rate of 5 percent on the expensive and costly services provided by educational institutions, doctors, and laboratories charging exorbitant fee or charges, generally borne by affluent persons.
Similarly, the inter-city road transportation of goods in Sindh or from Sindh shall also be levied to Sindh sales tax at a reduced rate of 5 percent.
However, the levy in these sectors will only be made in line with the ability to pay principles and in areas where such levies do not impact the poorest sectors of society.
Regarding other taxes and levies administered by Board of Revenue and Excise & Taxation Department.
The proposals include:
(i) Revisions of rates of Stamp Duty on Affidavit, Memorandum of Agreement, Bank Guarantee, Bill of Lading, Letter of Credit and Bond. Rates of these items were last revised 10 to 20 years ago;
(ii) Withdrawal of Exemption granted to Co-Sharer at 1 percent now Co-Sharer may pay 2 percent of Stamp Duty as chargeable on Conveyance;
(iii) Currently 2 percent Stamp Duty of the value of the Immoveable Property is being charged. It is proposed to include Movable Property for charging the said Stamp Duty.
(iv) Revisions of rates of Stamp Duty on Gift Instrument. Relief will be provided to Legal Heirs as they will have to pay one fourth of Stamp Duty whereas others will have to pay Stamp Duty on Sale Deed.
(v) It is proposed that in Article 21 (Lease) new category of open Plot is to be included. Moreover, exemption (in terms of different slabs of Stamp Duty) to different categories is proposed to be abolished and every one will have to pay 1 percent of Stamp Duty. Owners of Open Plot will also pay Stamp Duty.
(vi) Enhancement of Storage Fee on the storage of rectified spirit in warehouses;
(vii) Enhancement of Transfer Fee on Motorcycle and Commercial vehicles;
(viii) Enhancement of Life Time Tax on Motorcycles/Scooters;
In order to improve tax administration, enhance capacity of the government to collect taxes more efficiently, to plug in tax leakages, broaden the tax base and improve the financial management of the province, the government has prepared a Reforms Plan for resource mobilization. This plan will be implemented from July 01, 2014 for the next three years.
For this purpose, a Tax Reform Unit will be established in Finance Department, which will maintain linkages with all tax collecting agencies, legislatures, academia and major stakeholders like Chambers of Commerce & Industries, and Professionals.
Further automation will be introduced and through better management and administration provincial tax receipts will be increased from the current Rs 91.37 billion to Rs 200 billion in next three years.
The Sindh government presented Rs686 billion budget with deficit of Rs14 billion.