In a pivotal move aimed at simplifying the tax system, the Khyber Pakhtunkhwa (KPK) government has announced the implementation of a fixed sales tax on services for lawyers and customs agents.
The decision was reached during a meeting on Wednesday between Muzzammil Aslam, Advisor to the KP Chief Minister on Finance, and Fouzia Iqbal, Director General of the Khyber Pakhtunkhwa Revenue Authority (KPRA).
Under the new regime, set to be introduced in the upcoming financial year’s budget, both lawyers and customs agents will transition from a percentage-based sales tax to fixed rates. This significant change will facilitate easier and more efficient tax payments by professionals within these sectors.
During the meeting, it was agreed that KPRA would forward recommendations to the Advisor for Finance to amend the Khyber Pakhtunkhwa Sales Tax on Services Act 2022. The suggested amendments are expected to streamline tax processes and increase compliance, reducing the administrative burden on service providers.
Under the proposed system, lawyers will be required to pay a one-time fixed sales tax upon filing their Wakalatnama, or Power of Attorney, for each case they handle in court. Similarly, customs agents will be charged a fixed sales tax per Goods Declaration (GD) they process. The exact rates for these fixed taxes will be determined based on recommendations from the KPRA team to the finance department.
The current tax structure imposes a 2% sales tax on services for lawyers and an 8% sales tax for customs agents. The shift to a fixed tax model is part of the KP government’s broader strategy to enhance tax administration and increase participation in the formal economy.
Advisor Muzzammil Aslam expressed optimism about the new tax regime, stating, “We want to make tax payments easier for everyone in the province, and at the same time, we have to bring them under the tax net as per law.” He further highlighted that similar fixed tax regimes are planned to be implemented for other services such as wedding halls and beauty parlors.
“The introduction of a fixed tax rate will simplify the tax process, making it less daunting for service providers to fulfill their tax obligations,” Aslam added. “This will not only foster a better business environment but also ensure greater compliance and revenue generation for the province.”
DG KPRA Fouzia Iqbal welcomed the government’s business-friendly policies and reassured that her team would provide full support in assisting taxpayers with the new sales tax administration. “Our goal is to facilitate our taxpayers as much as possible, ensuring a smooth transition to the new system,” she said.
The new fixed tax policy is expected to be well-received by the business community, providing clarity and predictability in tax obligations. By reducing the complexity associated with percentage-based calculations, KPRA aims to encourage a higher rate of compliance and foster a more conducive environment for businesses operating in the province.
As KPK gears up for these changes, further details on the fixed rates and the implementation process are anticipated to be released following the finalization of the upcoming budget. This initiative marks a significant step towards modernizing tax administration and supporting economic growth in Khyber Pakhtunkhwa.
