Karachi, January 4, 2024 – The Sindh Revenue Board (SRB) has recently issued updated guidelines to banks concerning the payment of sales tax on services in the province.
The new guidelines, released on Thursday, aim to streamline and clarify the process for the collection and remittance of Sindh sales tax on specified services.
Previously, the SRB had established a procedure for payment, designating scheduled banks as collection agents responsible for collecting and remitting taxes on specified services. This applied to recipients of services (excluding companies on the Active Taxpayers List maintained by SRB or the Federal Board of Revenue (FBR) under the sales tax act) based in Sindh, making payments through any means for the transfer of consideration to service providers not residing in Pakistan.
Following the issuance of the initial rules, the SRB received representations from certain banks requesting additional guidelines for the collection and payment of Sindh sales tax. In response to these requests, the SRB has now issued fresh guidelines to complement the existing procedure and facilitate compliance by banks.
According to the new guidelines, in cases where payments are made through Debit Cards or Credit Cards, the collection agent (banks) is required to collect Sindh sales tax at the rate of 13 percent of the amount remitted for specified merchant categories. For advertisement services, the tax rate is set at 3 percent of the remitted amount. The same 3 percent rate applies to services related to software or IT-based system development, including cloud-based content streaming services.
For over-the-counter payments, the collection agent is mandated to collect Sindh sales tax at the rate of 13 percent for advertisement services and market research agency services. Additionally, a 3 percent tax is applicable to the amount remitted for services provided by software or IT-based system development consultants, including cloud-based content streaming services.
The SRB emphasized that banks must collect tax amounts at the prescribed rates for specified services, even when payments are remitted under merchant category codes or State Bank of Pakistan (SBP) outward remittance codes not explicitly mentioned in the guidelines.
The collected sales tax is to be deposited by banks into the provincial treasury by the 15th day of the month following the tax period in which the consideration amount was remitted. This deadline ensures timely submission of tax revenues to the provincial authorities, contributing to the effective functioning of the tax system and supporting fiscal responsibilities.
The issuance of these fresh guidelines is seen as a proactive step by the SRB to enhance transparency, compliance, and efficiency in the collection and remittance of sales tax on services, providing clear directives for banks operating in the province.
