The Sindh Revenue Board (SRB) has announced a 13% sales tax rate on services provided by banking companies within the province. This update, effective from November 1, 2020, clarifies the applicable sales tax on a wide range of banking services.
According to the SRB, the sales tax applies to various services offered by banks. The comprehensive list of taxable services includes guarantees, such as bank guarantees, and services related to brokerage. It also encompasses the issuance of financial instruments like letters of credit, cheque books, pay orders, and demand drafts.
Additionally, transactions involving bills of exchange and different methods of money transfer, including telegraphic, mail, and electronic transfers, are subject to the sales tax. Commissions, including those related to bill discounting, are also taxable under the new directive.
Banking services involving safe deposit lockers and safe vaults fall under the taxable category. The SRB also includes services not specified elsewhere, ensuring a broad coverage of banking activities. The issuance, processing, and operation of credit and debit cards are specifically mentioned as taxable services.
Foreign exchange dealings, particularly commissions and brokerage associated with these transactions, will also attract the 13% sales tax. Automated Teller Machine (ATM) operations, maintenance, and management services are not exempt from this tax. Additionally, the role of banks acting as a banker to an issue is included in the taxable services list.
The SRB’s updated tariff serves as a guide for banks to understand the specific services that are subject to the provincial sales tax. It aims to ensure compliance and streamline the collection process within the banking sector. By outlining these taxable services, the SRB is taking steps to enhance transparency and efficiency in tax administration.
This move is part of the SRB’s broader efforts to bolster revenue collection from the services sector. By clearly defining the services subject to sales tax, the board seeks to avoid any ambiguity and improve tax compliance among banking companies. This will ultimately contribute to the province’s revenue base, enabling it to fund various developmental and infrastructural projects.
Banking companies operating in Sindh are advised to review their service offerings and ensure they are in compliance with the updated tax requirements. The SRB’s notification serves as a reminder of the importance of adhering to provincial tax laws and regulations.
The implementation of the 13% sales tax on banking services underscores the Sindh government’s commitment to expanding its tax net and increasing revenue from the services sector. This measure is expected to generate significant revenue for the province, helping to address fiscal challenges and support economic growth.
As the SRB continues to refine its tax policies, businesses in the province can expect further updates and guidance on tax compliance. For now, the emphasis remains on ensuring that all taxable services provided by banks are properly accounted for and that the appropriate sales tax is remitted to the provincial government.
