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  • Sindh Revenue Board announces tax incentive package

    Sindh Revenue Board announces tax incentive package

    KARACHI: Sindh Revenue Board (SRB) has announced tax incentive scheme and waived up to 100 percent penalty amount on payment of outstanding amount, said a statement on Monday.

    The SRB said that acceding to the request of the taxpayers, associations and tax bars, the provincial revenue authority, had issued tax incentive package, which provides substantial benefits and relief to the taxpayers, service providers and withholding agents, in return of their tax compliance, under the Sindh Sales Tax on Services Act, 2011.

    The package includes exemption of up to 100 percent of the amount of default surcharge, total remission of penalties and immunity from arrest and prosecution if the taxpayer deposits:

    1. the liability of the arrears of tax (as outstanding on May 31, 2020) plus zero percent of the amount of default surcharge thereon between June 01, 2020 and June 15, 2020;
    2. the liability of arrears tax (as outstanding on May 31, 2020) plus five percent of the amount of default surcharge thereon between June 16, 2020 and June 22, 2020; and
    3. the liability of arrears of tax (as outstanding on May 31, 2020) plus 10 percent of amount of default surcharge between June 23, 2020 and June 30, 2020.

    The SRB said that in case where no tax liability is outstanding but only the arrears of amounts of penalty and/or default surcharge are outstanding, tax incentive package allows the remission of 95 percent of the amount of such penalty and 90 percent of the amount of such default surcharge, if the balance of the amounts of penalty and default surcharge are deposited during the period from June 01, 2020 to June 30, 2020.

    The provincial revenue authority advised all taxpayers, service providers and withholding agents to avail the benefits of the tax incentive package which shall expire at the close of June 30, 2020.

    The incentives announced through the notification provide and opportunity to the taxpayers to get substantial waiver of their liability to pay penalties and default surcharge by depositing the outstanding amounts of tax liabilities during the period the said notification is valid.

    The SRB further said that the package may also help in resolution of disputes pending in litigation, appeals, adjudication or audit.

  • SRB urged to allow normal tax for car dealers

    SRB urged to allow normal tax for car dealers

    KARACHI: Sindh Revenue Board (SRB) has been urged to bring authorized dealers of car manufacturers into normal tax regime.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to SRB, recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    It said that sales tax on services by authorized car dealers under tariff heading 9806.4000, is at reduced rates and input sales tax is barred, while no such position is available under any of the other provincial sales tax laws.

    Further, no option is available to the service provider to pay sales tax at the normal rate at the rate of 13 percent, instead of reduced rate, as provided for other services under notification No.SRB 3-4/5/2015 dated Jul 01, 2015, e.g. Construction services, Transportation services, Concrete services etc.

    The OICCI recommended that normal sales tax rate should be applied for services provided by authorized car dealers under tariff heading 9806.4000.

    Alternatively, option should be provided to “authorized car dealers of vehicle manufacturers” to pay sales tax at normal rate under tariff heading 9806.4000, as provided to other services.

    Application of standard rate will eliminate the discrimination arising on services provided by dealers in Sindh against other provinces and cost of doing business will reduce for service providers and recipients, it added.

  • Insurance should be excluded from taxable services

    Insurance should be excluded from taxable services

    KARACHI: The provincial tax authorities have been urged to exclude insurance from taxable services in order to provide incentives to insurance industry.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 submitted to Sindh Revenue Board (SRB), said that each year, the life/health insurance companies have been approaching the SRB for an exemption, which is granted annually.

    The last exemption for life insurance was valid only till June 30, 2019, whereas exemption for Corporate Health Insurance is valid till June 30, 2020 and has not yet been renewed.

    The life and health insurance industry is based largely in the province of Sindh, where, the medical sector itself is exempt from SST.

    Accordingly, subjecting the corporate health insurance to SST is making it uncompetitive, in Sindh, by adding on to the cost of health insurance.

    Discussions are still ongoing with the Chairman SRB, and the Chairperson, Sindh Board of Investment, for exemption on the same.

    The OICCI recommended that both, life insurance and health insurance, which do not fall within the scope of definition of service, should be permanently included in the list of exempted services by incorporating the same under table of exempted services specified in SRB’s notification no. SRB 3-4/7/2013 dated June 18, 2013, as per the following:

    01. 9813.15: Life Insurance

    02. 9813.16: Health insurance, rendered to both, individuals and corporates.

    It may be mentioned that in Sindh these are taxable services.

    A life insurance/ health policy is not a service. It is an underwriter’s promise to pay to the policy holder ‘in the future’, a specified sum of money, ‘either on occurrence of an identified event or on maturity of the policy’.

    Such tax is highly discriminatory as entire health sector itself remains exempt and is not taxed.

    This creates a deterrence for insurance business, as a person obtaining insurance would be paying additional 13 percent as well as cost of insurance, compared to directly obtaining health services, where he does not have to pay this tax.

    This is clearly discriminatory and in violation of Article 25 of the Constitution of Pakistan.

    The assertion that insurance is not a service, has also been legally upheld in USA and the Court there has ruled that life insurance policies are not “services”.

    The KP Revenue Authority has exempted life insurance from the purview of taxable services. Uniformity across the country is essential for ease of doing business.

  • Sindh proposed to exempt sales tax on export of services

    Sindh proposed to exempt sales tax on export of services

    KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax on export of services.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2020/2021 presented to SRB, said that as per the Fifth Schedule to the Sales Tax Act 1990, exports made by a registered person are zero-rated.

    “Presently, there is no concept of zero-rating in Provincial Sales Tax Acts,” it said.

    Resultantly, the companies providing services to foreign companies and bringing foreign exchange in Pakistan need to pay sales tax from their own account.

    The OICCI recommended that a separate schedule should be inserted in Provincial Sales Taxes Act for zero rating. “All services provided to foreign companies outside Pakistan which result in inflow of foreign exchange and export of all taxable services should be exempt from Sind Sales Tax.”

    Giving rationale to the proposals, the OICCI said that this will result in harmonization of tax laws in Pakistan and would ensure convenient compliance with tax laws through uniform systems across the country and would also contribute towards the economic development of the Country.

    The OICCI highlighted another issue that all pharmaceutical products are exempt from Sales Tax.

    Consequently any sales tax paid by pharmaceutical industry on goods or services purchased, can neither be passed on to the consumer nor can be claimed as input, and has to be absorbed by the manufacturers in their costs.

    It is resulting in increasing the cost of doing business and is also against the philosophy of sales tax which is supposed to be borne by the consumer.
    Therefore, it is recommended that services received by pharmaceutical industry should be zero rated.

    Since pharmaceuticals prices are controlled, sales tax paid on inputs can neither be added to the selling price nor separately charged.

  • Withholding sales tax should be exempted on services rendered to registered persons

    Withholding sales tax should be exempted on services rendered to registered persons

    KARACHI: Sindh Revenue Board (SRB) has been proposed to exempt sales tax withholding in case a registered person renders services to another registered person.

    Withholding of sales tax from registered sales tax persons with Sindh Revenue Board (SRB), does not provide any benefit and only creates hardships for genuine taxpayers of reconciliations and delay in adjustments, said Overseas Investors Chamber of Commerce and Industry (OICCI) in its budget proposals for 2020/2021 submitted to the SRB.

    It further said that similar to federal sales tax law, exemption should be given if payment being made to sales tax registered person against withholding sales tax.

    Withholding tax rules are applicable on active taxpayers also.

    The OICCI recommended:

    i. Withholding should be exempted from deduction of Sales Tax at applicable rate against the payments to the Sales tax registered persons with SRB, in line with Federal Laws.

    ii. The rate of withholding sales tax against the invoices of unregistered persons should be reduced to 5% in line with the FBR’s Withholding Sales Tax regime as applicable under SRO.660 (I)/2007.

    iii. Withholding tax rules should not applicable on active taxpayers.

    Giving rationale to the proposals, the OICCI said that the withholding agents are unnecessarily burdened with deduction of sales tax which is not claimable as input tax and is thus resulting in increasing their cost of doing business.

    Similar matters have already been decided by the courts in case of sales tax withholding rules of FBR and PRA. The ultimate objective of the taxpayer is that indirect tax should not increase its cost of doing business. Moreover these enforcement measures have negative bearing on the regulated sector only.

    The purpose of withholding tax deduction is to ensure that non-active & nonregistered taxpayers can be detected. Compliance burden of businesses can be reduced for businesses by exemption deduction at source for active taxpayers.

    PRA allows similar provision [Sindh Sale Tax Special Procedures (Withholding Tax) Rules, 2014 read with notification SRB-3-4/14/2014].

  • Reverse charge should only be levied on service providers located outside Pakistan

    Reverse charge should only be levied on service providers located outside Pakistan

    KARACHI: Sindh Revenue Board (SRB) has been advised that reverse charge should be restricted to such cases where service providers are located outside Pakistan.

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  • Sindh urged to bring down sales tax rate at 10 percent

    Sindh urged to bring down sales tax rate at 10 percent

    KARACHI: Sindh Revenue Board (SRB) has been suggested to bring down sales tax on services rate to 10 percent from existing 13 percent to encourage registration of more taxpayers.

    Overseas Investors Chambers of Commerce and Industry (OICCI) in its budget proposals 2020/2021 submitted to the SRB, said that the expectations of the investors that the SRB will continue the reduction of Sales Tax rate on services to 13 percent, as done in fiscal year 2016-17, remained unrealized.

    “Although, investors appreciate that the Sales Tax rate in Sindh province at 13 percent is the lowest in the country, it remains higher than comparative regional tax rates.”

    The OICCI suggested that to keep in-line with the regional developing countries, reduction in sales tax on services should be made by 1 percent in the Sindh Finance Act 2020-2021 and gradually reduced to 10 percent over the next three years for registered entities, whilst the current rate should be maintained for unregistered entities.

    This will encourage registration to avail the benefits of input adjustment.

    The OICCI also suggested that the option to opt for the basic rate or normal regime should be given to all the service providers who fall under the reduced/fixed rate regime.

    This option will reduce the cost of doing business for recipient of services as lower tax is not available for input tax adjustment, the OICCI added.

  • Federal, provincial tax conflict hampers FDI

    Federal, provincial tax conflict hampers FDI

    KARACHI: Foreign investors have said that duplication of taxes due to lack of coordination between federal and provincial tax authorities are hampering foreign direct investment (FDI) into Pakistan.

    The Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors in Pakistan, said that duplicate taxation is causing hardships to taxpayers and has given rise to unnecessary litigations and is one of the deterrents in attracting FDI in Pakistan.

    The OICCI in its budget proposals for 2020/2021 submitted to Sindh Revenue Board (SRB) said that all the four provinces and the federal government have introduced distinct sales/service tax laws for their respective jurisdictions, with some of the clauses in clear conflict with each other resulting in foreign investors being pursued and harassed by the federal and provincial revenue collectors (FBR, PRA, SRB, KPRA and BRA) demanding tax on the same transactions creating undue hardship and double taxation claims for taxpayers.

    “This situation is highly undesirable and creates complexities for investors,” the OICCI said.

    Giving an example, the OICCI said that a service provider registered in Sindh providing taxable services to recipient in Punjab is liable to pay sales tax in Sindh whereas the withholding agent (recipient of service) is registered in Punjab and is liable to withhold sales tax and pay the same to Government of Punjab.

    Although, some improvements have been noted in the coordination between the revenue authorities, investors’ concerns continue, for e.g. the issue of levy of sales tax at ‘origination’ and ‘termination’ of service in both the provincial legislations on services has still not been resolved.

    Section 60A and 60B of the Income Tax Ordinance, 2001 has not been amended to allow contribution to Provinces in respect of WWF and WPPF.

    The OICCI recommended:

    In line with International and Regional practices a uniform service tax law may be drafted and agreed upon by the tax authorities of the Provinces and Federal Government, for implementation in their respective jurisdiction. Furthermore, a uniform tax return may also be introduced for the taxpayers.

    The above points can be addressed by taking the following steps which will lead to effective management and expansion of the tax base:

    i. A policy board comprising of the Chairmen of the Federal and Provincial revenue authorities (FBR, PRA, KPRA, BRA and SRB) should be formed to ensure synchronization of the policies, standard tax rates, basis of apportionment of revenues and removal of all anomalies/ conflicts between the laws of the different revenue boards (for example issues of jurisdiction, sales tax on toll manufacturing, clarity on jurisdiction and deductibility of WPPF/WWF expenses paid to the provinces).

    ii. Revenue authorities should decide the basis of levy of indirect tax, which can be origination or termination, to establish jurisdiction of taxation of services;

    iii. To promote transparency and uniform interpretation, a ‘Standard schedule’ should be introduced covering all services along with standard Tariff Headings and Standard definitions. The standard schedule should be adopted by all provinces and Islamabad Capital Territory while levying sales tax on services in their respective jurisdictions

    iv. One return may be filed with identification of provincial head of account and direct deposit of share of tax of each province.

    v. SRB to resolve with FBR for appropriate amendment in IT Ordinance, 2001 to ensure that payments made to the provincial tax authorities on account of WWF and WPPF are allowed as tax deductible expense.

    vi. SRB should take up the matter with FBR for the proper mechanism for adjustment of input tax on franchise service payable in reverse charge mode.

  • SRB extends return filing date up to June 01

    SRB extends return filing date up to June 01

    KARACHI: Sindh Revenue Board (SRB) has extended the date for filing monthly sales tax return for April 2020 up to June 01, 2020.

    In a circular issued on Thursday, the SRB permitted the registered persons, including the withholding agents covered by the provisions of the Sindh Sales Tax Special Procedure (Withholding) Rules, 2014, to:-

    (i) e-deposit the amounts of Sindh sales tax for the tax period April, 2020, on or before Friday, the May 29, 2020, in Sindh Government’s head of account “B-02384” in the prescribed manner; and

    (ii) e-file their tax returns (in Form SST-03 or Form SSTW-03, as the case may be) for the tax period April, 2020, on or before Monday, the 1st June, 2020, in the prescribed manner.

  • Sindh exempts sales tax on Ehsaas Emergency cash transfer

    Sindh exempts sales tax on Ehsaas Emergency cash transfer

    KARACHI: Sindh Revenue Board (SRB) on Wednesday exempted sales tax on services to banking transfers made to Ehsaas Emergency Program.

    In a notification, the SRB said that the Sindh government had exempted the sales tax on the amount of commission (tariff heading 9819.1300) paid by the banks to their branchless banking retailers in Sindh on account of disbursement of financial assistance under the Ehsaas Emergency Cash Transfer Program of the government of Pakistan, subject to the conditions that the amount on account of such commission or service fee is not deducted from the amount of the financial assistance so transferred to the beneficiary, receiving the financial assistance, is paid the full amount of the assistance transfer.

    The SRB said that the exemption has been granted till 23:59 hours on June 30, 2020.