SRB Outlines Tax Rates on Banking Services for Tax Year 2024

SRB Outlines Tax Rates on Banking Services for Tax Year 2024

Karachi, February 5, 2024 – The Sindh Revenue Board (SRB) has outlined the sales tax rates on various services provided by banks for the tax year 2024.

This move comes as part of the board’s efforts to streamline and regulate the taxation of banking services, ensuring a fair and transparent system.

The SRB has updated the Sindh Sales Tax on Services Act, 2011, specifically addressing tax rates applicable to services offered by banking institutions. According to the updated guidelines, the sales tax rate on a wide array of banking services will be set at 13 percent for the fiscal year 2024.

The outlined tax rates cover a comprehensive range of services provided or rendered by banking companies. Some of the key services include:

1. Guarantee, including bank guarantee: Banking institutions often provide guarantees to facilitate various transactions, and the 13 percent sales tax will now be applicable on these services.

2. Brokerage: Charges associated with brokerage services offered by banks will also be subject to the 13 percent sales tax rate.

3. Letter of credit: The issuance of letters of credit, a crucial aspect of trade transactions, will fall under the purview of the revised tax rates.

4. Issuance of cheque books, pay order, and demand draft: Services related to the issuance of financial instruments like cheque books, pay orders, and demand drafts will attract the 13 percent sales tax.

5. Bill of exchange: Transactions involving bills of exchange will now be subject to the revised sales tax rate.

6. Transfer of money: Various forms of money transfers, including telegraphic transfer, mail transfer, and electronic transfer, will be taxed at 13 percent.

7. Commission, including bill discounting commission: The sales tax will be levied on commissions charged by banks, including those related to bill discounting.

8. Safe deposit lockers and safe vaults: Banking services related to safe deposit lockers and safe vaults will fall under the 13 percent tax bracket.

9. Other services, not elsewhere specified: The SRB has also included a category for miscellaneous services not explicitly mentioned, ensuring a comprehensive coverage of banking activities.

10. Issuance, processing, and operation of credit and debit cards: The entire spectrum of credit and debit card services, from issuance to processing and operation, will be subject to the 13 percent sales tax.

11. Commission and brokerage in foreign exchange dealings: Services involving foreign exchange dealings, including commissions and brokerages, will be taxed as outlined by the SRB.

12. Automated Teller Machine (ATM) operations, maintenance, and management: The operations, maintenance, and management of ATMs will also be subject to the 13 percent sales tax.

This move by the SRB aims to ensure that the banking sector contributes its fair share to the provincial revenue while maintaining clarity and consistency in the taxation framework. The 13 percent sales tax on these banking services is expected to have implications on the cost structure of these services for both financial institutions and consumers alike. As the fiscal year progresses, the industry will closely monitor the impact of these tax revisions on the banking landscape in Sindh.