Karachi, February 9, 2024 – The sales tax collection on banking services in Pakistan saw a remarkable growth of over 17 percent during the fiscal year 2022-23, as indicated by a report released by the Sindh Revenue Board (SRB) on Friday.
Despite challenging economic conditions and the impact of the State Bank of Pakistan’s directives on Letters of Credit under the Import Substitution Policy, the banking sector contributed significantly, generating Rs. 11.33 billion.
The report highlights a resilient performance by the banking sector, exhibiting a 17.2 percent year-on-year growth compared to the previous fiscal year, where collections stood at Rs. 9.66 billion. This growth is particularly noteworthy considering the hurdles imposed by economic challenges and policy directives affecting banking operations.
Services provided or rendered by banking companies fall under the Sales Tax on Services (SST) category, specifically tariff heading 98.13 and relevant sub-tariff headings. The standard rate for the levy of SST on these services is set at 13 percent. It’s important to note that markup or interest charged by banks is excluded from the purview of the SST, ensuring a fair and balanced taxation framework.
The banking sector plays a pivotal role in the economic landscape, serving as a crucial facilitator for businesses and individuals. The substantial growth in sales tax collection from banking services is indicative of the sector’s resilience and its ability to navigate challenges while contributing significantly to the government’s revenue.
Despite the hurdles posed by economic conditions and policy directives affecting the issuance of Letters of Credit under the Import Substitution Policy, the banking sector has demonstrated adaptability and strength. The growth in sales tax collection underscores the confidence of stakeholders in the banking industry and its vital role in the country’s economic stability.
The SRB’s report not only sheds light on the financial performance of the banking sector but also provides valuable insights for policymakers and industry stakeholders. The 17 percent growth in sales tax collection indicates the sector’s continued contribution to the national exchequer and affirms its position as a key player in driving economic growth.
As the banking industry continues to evolve and face new challenges, maintaining a conducive regulatory environment and fostering collaboration between the public and private sectors will be essential. The growth in sales tax collection from banking services is a positive indicator for the overall economic outlook and underscores the sector’s importance in supporting sustainable development in Pakistan.
