KARACHI: Sindh envisages over 24 percent increase in its sales tax on services collection for the year 2016-17 to Rs76.012 billion, which the government intends to collect by streamlining tax rates and brining new sectors in the ambit of sales tax on services.
Sindh government has proposed that the standard rate of Sindh sales tax be reduced to 13 percent for the year 2016-17.
Sindh has gradually reduced the standard rate of sales tax. While the standard rate of sales tax is 17 percent in Federation, 16 percent in Punjab and Islamabad Capital Territory (ICT) and 15 percent in Khyber Pakhtoonkhuwa and Balochistan, Sindh reduced this rate from 16 percent to 15 percent in 2014-15 and 14 percent in 2015-16.
The reduction in the statutory rate of Sindh sales tax and the simultaneous continuation of higher statutory rates of sales tax in the federation and other provinces has caused a breach in the net collection of Sindh sales tax because the inputs suffer higher tax rate than the output tax of Sindh sales tax.
With a view to safeguarding the loss of Sindh sales tax revenue, it is proposed that this input tax credit of amounts accounting for more than 13 percent of the value of input shall not be allowed.
According to Sindh Finance Bill 2016, sales tax at the statutory rate of 13 percent is also imposed on chartered flight services within Sindh or originating from any airfield in sindh.
Moreover, sales tax would also be applicable on public relations services, cosmetic/plastic/transplantation surgery; supply chain management or distribution services.
Sindh government has also brought visa processing services within the ambit of sales tax. These include advisory or consultancy services for migration or visa application filing services.
Moreover, debt collection services and other debt recovery services rendered by certain agencies would be subject to statutory rate of sales tax.
These services are liable to provincial sales tax in other provinces but not in Sindh. With a view to equating the tax base of Sindh sales tax with those of other provinces, levy is proposed on these sectors.
At present persons having annual turnover of up to Rs3.6 million are exempted from sales tax on certain services. A 10 percent increase in this exemption threshold is proposed and now such small enterprises having annual turnover of Rs4.0 million will be exempted from the levy of sales tax.
The scope of exemption on internet and broadband services used by households, students and researchers is also increased. The exemption threshold on internet services is being enlarged from 2-mbps speed and Rs1,500/month per user to 4-mbps and Rs2,500/month per user.