Karachi, July 20, 2024 – The Sindh government has imposed a 15 percent sales tax on services rendered by restaurants across the province. The Sindh Revenue Board (SRB) announced the new working tariff for the tax year 2024-25, reflecting amendments introduced through the provincial finance act of 2024.
This new tax measure affects all restaurant services, including those provided by establishments located in hotels, motels, guest houses, and farmhouses. However, the Sindh government has introduced a reduced rate of sales tax at 8 percent for specific scenarios. The reduced rate applies to restaurant services where payments are made via debit or credit cards, mobile wallets, or QR scanning. Notably, input tax credit or adjustment will not be permissible under these conditions.
The SRB’s notification also highlights exemptions from this sales tax for certain restaurants. Specifically, restaurants with a turnover not exceeding 2.5 million rupees in a financial year are exempt from the sales tax, provided they do not meet certain criteria. The exemption does not apply to:
1. Restaurants that are air-conditioned at any point during a financial year or those located within air-conditioned shopping malls or plazas.
2. Establishments within the buildings, premises, or precincts of hotels, motels, guest houses, farmhouses, or clubs whose services are already liable to sales tax.
3. Restaurants providing services within the premises, precincts, halls, or lawns of hotels, motels, guest houses, farmhouses, marriage halls, or clubs subject to sales tax.
4. Franchisers or franchisees.
5. Restaurants with multiple branches or more than one outlet in Sindh.
6. Establishments with total utility bills (gas, electricity, and telephone) exceeding Rs. 40,000 in any month during a financial year.
The imposition of this tax is part of the Sindh government’s broader strategy to enhance provincial revenues and streamline tax compliance. By introducing a differentiated tax structure, the government aims to encourage digital payments and ensure greater transparency in transactions. The new tax regime is expected to have a mixed impact on the restaurant industry, with smaller establishments benefiting from the turnover-based exemptions while larger, more established businesses face the full 15 percent rate.
Restaurant owners and stakeholders in Sindh are now required to align their accounting and payment systems with the new tax regulations. The SRB has urged all affected businesses to ensure timely compliance to avoid penalties and disruptions in their operations. As the province navigates these fiscal changes, the long-term effects on consumer behavior and the hospitality sector’s growth remain to be seen.