Karachi, July 24, 2024 – The Sindh Revenue Board (SRB) has imposed a 15 percent sales tax on insurance services provided within the Sindh province, effective immediately.
This move follows amendments introduced through the provincial Finance Act, 2024.
The SRB released an updated working tariff that outlines the new sales tax rates on various services, reflecting the latest legislative changes. According to the SRB, a 15 percent sales tax will be applied to services provided or rendered in respect of insurance to a policyholder by an insurer, including re-insurers. This tax also extends to services provided by insurance companies related to guarantees, including insurance guarantees.
Specifically, the SRB stated that services such as goods, fire, and theft insurance will now attract the 15 percent sales tax. Additionally, marine insurance services will also be subject to the same rate, although marine export insurance remains exempt from this tax.
The standard sales tax rate of 15 percent also applies to life insurance services. However, there are provisions for reduced rates and exemptions. A reduced rate of 3 percent is available for:
1. Life insurance services, other than group life insurance.
2. Input tax credit/adjustment, which shall not be admissible under these circumstances.
Furthermore, the SRB has provided an exemption on sales tax for life insurance services for policies other than group life insurance, where the coverage amount is up to five hundred thousand rupees. This exemption aims to make insurance more accessible and affordable for individuals with smaller coverage needs.
The SRB’s decision to impose these taxes is part of a broader strategy to increase provincial revenue and ensure a consistent tax framework across various services. The implementation of these new tax rates is expected to have significant implications for the insurance sector in Sindh, potentially affecting both policyholders and insurers.
Insurance companies operating within Sindh will need to adjust their pricing and service strategies to comply with the new tax regulations. Policyholders should anticipate potential changes in their premiums and coverage options as insurers incorporate the additional tax costs into their service offerings.
As these changes take effect, stakeholders in the insurance industry, including policyholders, insurers, and brokers, are advised to stay informed and seek clarity on how the new tax rates will impact their existing and future insurance policies.
The SRB’s move underscores the importance of staying abreast of legislative changes and their potential effects on various sectors of the economy. As the insurance landscape evolves in response to these new tax measures, all parties involved will need to navigate the changes carefully to ensure compliance and continued service delivery.