Karachi, July 23, 2024 – The Sindh government has announced a conditional sales tax exemption for services provided by beauty parlors and beauty clinics, according to the Sindh Revenue Board (SRB).
The SRB, the provincial revenue collecting agency, issued a working tariff for the tax year 2024-25, detailing the conditions under which these exemptions apply.
Details of the Sales Tax Exemption
The sales tax exemption applies to the following services:
1. Hair Cutting, Hair Dressing, Hair Dyeing, and Shaving:
o Providers of these services are exempt from sales tax provided they do not offer any other beauty treatments, beauty care, or related services typically offered by beauty parlors or clinics.
2. Beauty Parlors or Clinics and Slimming Clinics with Turnover Below Rs. 2.5 Million:
o Services rendered by beauty parlors, beauty clinics, and slimming clinics whose annual turnover does not exceed Rs. 2.5 million are exempt from sales tax.
Conditions for Exemption
However, the SRB specified several conditions under which the exemption would not apply:
1. Location:
o Beauty parlors, clinics, and slimming clinics located within the premises of hotels, motels, guest houses, or clubs whose services are liable to tax are not eligible for the exemption.
2. Franchise Status:
o Franchisers or franchisees do not qualify for the exemption.
3. Multiple Outlets:
o Businesses with branches or more than one outlet in Sindh are not eligible.
4. Utility Bills:
o If the total utility bill (electricity, gas, and telephone) exceeds Rs. 25,000 in any month during a financial year, the exemption does not apply.
Standard and Reduced Sales Tax Rates
The SRB has maintained the standard sales tax rate at 15% for services provided by beauty parlors, beauty clinics, and slimming clinics. However, a reduced rate of 10% is available under the condition that input tax credit or adjustment is not admissible.
Further Reduced Rate with Additional Conditions
The Sindh government has introduced an additional reduced sales tax rate of 5%, subject to stringent conditions:
1. Electronic Submission:
o The registered person must electronically submit their election or option in Form “B” as per rule 42C of the Sindh Sales Tax on Services Rules, 2011.
2. POS Machine Installation:
o The registered person must install a Point of Sale (POS) machine for the electronic issuance of invoices or receipts and ensure that all such machines are linked with the SRB web portal (e.srb.gos.pk) to the satisfaction of the SRB.
3. Electronic Invoicing:
o All tax invoices, bills of charges, or receipts must be issued electronically through the POS system of the registered person. No paper or non-electronic invoices are permitted.
4. No Input Tax Credit/Adjustment:
o Input tax credit or adjustment shall not be admissible under this reduced rate.
Implications for Beauty Parlors and Clinics
The conditional exemption and the varying tax rates aim to provide some relief to smaller businesses while ensuring that larger and more established entities contribute fairly to the provincial revenue. By enforcing conditions such as electronic invoicing and POS machine installations, the SRB aims to enhance transparency and reduce tax evasion.
Businesses in the beauty industry must carefully assess their compliance with the new regulations to benefit from the exemptions and reduced rates. The SRB’s focus on digital compliance measures reflects a broader trend towards modernizing tax administration and ensuring better oversight.