Karachi, July 5, 2025 – In a major step toward aligning its tax practices with international standards, the Sindh Revenue Board (SRB) has officially adopted the Central Product Classification (CPC) Version 2.1 developed by the United Nations (UN) for the classification of services under the Sindh Sales Tax on Services Act, 2011.
The move was formalized through SRB notification No. SRB-3-4/28/2025, which states that all services taxable under the provincial law will now be categorized based on the UN’s CPC system. This classification structure will ensure greater consistency, transparency, and efficiency in the administration of the Sindh sales tax regime.
Purpose of Classification Implementation
The newly enforced classification system is designed to streamline data collection, improve statistical analysis, and promote standardized reporting of services. By adopting the UN’s CPC Version 2.1, Sindh becomes one of the first provincial jurisdictions in Pakistan to fully integrate a globally recognized classification into its revenue collection processes.
The CPC system organizes all goods and services into a hierarchical five-level structure. These levels range from broad sections down to specific subclasses. For instance, major categories include agriculture products, construction services, and community or personal services. Within each section, services are further detailed through divisions, groups, classes, and subclasses, allowing for a nuanced understanding of the service economy.
Key Principles and Features
The classification system adopted by Sindh is built on principles of mutual exclusivity and exhaustiveness. This means every service must fit into one category, and no two categories overlap. These core rules ensure clarity and consistency in the treatment of services for taxation purposes. The classification also emphasizes product homogeneity within each category, helping tax administrators apply uniform tax rates across similar services.
Additionally, the CPC system is designed to align with six other statistical classification systems, most notably the International Standard Industrial Classification (ISIC). This alignment allows tax authorities in Sindh to understand not only what kind of service is being taxed but also which industries are primarily responsible for its provision. Each CPC subclass is linked to corresponding ISIC classifications, bridging the gap between product-based and activity-based reporting.
Rules of Interpretation for Tax Classification
The SRB has clarified rules of interpretation for service classification under the new system. In cases where a service could fall under multiple CPC categories, preference will be given to the most specific description. If classification remains uncertain, the category that captures the essential character of the service will be selected. When ambiguity still exists, the service will be assigned to the category occurring last in numerical order among comparable classifications. This structured approach ensures that even composite or evolving services can be consistently classified.
Future Guidance and Adaptability
To further aid in the accurate classification of services, explanatory notes and guidelines will be provided. These notes will offer examples and characteristics for newly emerging or ambiguous services. In complex cases, special rulings may be issued through the United Nations Classifications website, helping Sindh authorities adapt to evolving market dynamics while maintaining classification integrity.
The implementation of the CPC Version 2.1 in Sindh marks a transformative development in tax administration. It reflects the province’s commitment to modernization, transparency, and international best practices in public finance.
By embedding a globally recognized classification into its tax code, Sindh has not only improved the structure of its services tax regime but also enhanced its capacity for policy analysis, economic planning, and cross-border comparability. This classification initiative is poised to support a more effective and inclusive tax framework for years to come.