Sales tax on Services

Sales tax on Services

The provincial sales tax on services is a tax levied by the provinces on services provided only, as opposed to the sales tax levied by the government which is taxed on goods. Provincial sales is based on the idea of self-assessment, self-compliance and self-reporting by the taxpayer themselves with the revenue authorities having the ability to conduct an audit as they see fit.

The taxpayer is himself responsible to issue tax invoices, assess his tax liabilities, file sales tax returns, make tax payments, keep proper records and accounts of his taxable transactions and comply with other legal obligations.

The tax schemes do not cause double taxation as agreements are reached on the relevant areas by the provincial and federal authorities.

There are indeed some differences between the provincial tax schemes but generally they are quite similar with only minor adjustment. All provincial sales tax is governed by the Acts passed by the provincial Parliament and by Statutory Regulatory Orders.

There is also a withholding tax that is present in provincial sales tax. Among the more interesting aspects of tax law is the point at which the tax is liable.

There are 2 major point in provincial tax law where tax arises. These can be called the point of service and point of origin. A point of service is where the service being taxed is finished.

For example, if a courier is delivering a letter from Sindh to a city in Punjab, where the letter is received is where the service has concurred and that is where the tax is applicable. A point of origin is where the service has arisen.

Taking the same example as earlier, if a courier is delivering a letter from Sindh to a city in Baluchistan, the service
will be taxed in Sindh.

Reverse Charge:

If a taxable service is provided to a resident person by a non-resident person in the course of an economic activity, including the commencement or termination of activity, the liability to pay the tax shall be on the person receiving the service.

Export of Services

Generally, export of services is exempt from charging of sales tax, however the Sindh Revenue Board [SRB] is currently collecting three per cent sales tax on the exports of all categories of services, except those relating to information technology and chartered accountancy that are exempted.

Negative List/ Taxable Services

Currently there is no negative list of taxable services as services which are enlisted in second schedule are chargeable to tax only.

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