Karachi, February 11, 2024 – The insurance sector has emerged as a significant contributor to the Sindh government’s revenue, having paid a substantial amount of Rs 10.15 billion as sales tax on services during the fiscal year 2022-23, according to the latest report released by the Sindh Revenue Board (SRB).
The report highlights that the insurance sector witnessed a notable increase of 17 percent in its revenue collection compared to the previous fiscal year, maintaining its position as the fifth-largest sector contributing to tax revenue. This consistent presence among the top 10 revenue-generating sectors underscores the industry’s robust performance and economic significance.
In the preceding fiscal year 2021-22, the insurance sector had contributed Rs 8.67 billion to the Sindh government’s coffers, indicating a substantial growth in tax contributions over the year.
The services provided by insurers, including reinsurers, in the field of insurance fall under tariff heading 9813.1000 of the Second Schedule to the 2011-Act. Various categories of insurance, such as goods, fire, theft, and marine insurance, are subject to the standard Sindh Sales Tax (SST) rate of 13 percent. However, life insurance stands out with a reduced SST rate of 3 percent.
During the fiscal year 2022-23, health insurance and marine insurance for export remained exempt from Sindh sales tax, reflecting the government’s strategic approach to support and incentivize specific segments of the insurance industry.
Furthermore, the report specifies that services offered by insurance agents or brokers fall under tariff heading 9855.0000 of the Second Schedule to the 2011-Act, attracting a reduced tax rate of 5 percent. This incentivized tax rate aims to promote and facilitate the role of intermediaries in the insurance sector, acknowledging their contribution to the industry’s growth and development.
The increased contribution from the insurance sector is indicative of the industry’s resilience and adaptability to changing economic landscapes. The sector’s ability to navigate challenges and contribute significantly to the government’s revenue highlights its crucial role in the overall economic framework of the province.
The Sindh government’s decision to offer reduced tax rates for specific insurance categories aligns with broader economic strategies, aiming to promote sectors that contribute to societal well-being and economic development. By encouraging the growth of the insurance industry, the government not only fosters revenue generation but also enhances risk mitigation and financial security for individuals and businesses.
As the insurance sector continues to play a pivotal role in the financial stability of the province, its consistent contribution to the Sindh Sales Tax further establishes its importance in the economic landscape. The sector’s positive performance underscores the need for continued collaboration between the government and industry stakeholders to foster a conducive environment for sustainable growth and development.
