Karachi, July 22, 2024 – The Sindh government has announced a 15% sales tax on services provided by travel agents and tour operators for the tax year 2024-25. This decision, formalized through the provincial Finance Act, 2024, marks an increase in the sales tax rates for these services.
Travel Agents:
The sales tax rate on services provided by travel agents is now set at 15%. However, the government has introduced a provision allowing travel agents to opt for a reduced sales tax rate of 5%. This reduced rate comes with the condition that the input tax credit or adjustment will not be admissible. This measure is intended to offer some relief to travel agents while ensuring compliance with the new tax regulations.
Tour Operators:
Similarly, tour operators will also be subject to a 15% sales tax on their services. A reduced rate of 5% is available to tour operators under the same condition that the input tax credit or adjustment is not admissible. Additionally, the Sindh government has provided an exemption from sales tax on services related to Hajj and Umrah tour packages. This exemption aims to support the significant number of pilgrims traveling for these religious duties by reducing their financial burden.
The introduction of these tax rates reflects the Sindh government’s effort to streamline tax collection and increase revenue. By offering a reduced tax rate option, the government aims to balance the need for revenue with the operational challenges faced by travel agents and tour operators.
Industry stakeholders have expressed mixed reactions to the new tax rates. Some travel agents and tour operators are concerned about the impact on their businesses, particularly those that cannot benefit from the reduced rate due to the forfeiture of input tax credits. On the other hand, the exemption for Hajj and Umrah services has been welcomed as a positive step, acknowledging the importance of these religious journeys for many citizens.
The new tax rates are effective immediately, and travel agents and tour operators are advised to review the amendments and ensure compliance to avoid penalties. The Sindh government has reiterated its commitment to improving tax administration and providing a conducive environment for business operations within the province.