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KPMG Taseer Hadi & Co.

Chartered Accountants

Sales Tax on Services


2015-16

SALES TAX
15 JUNE 2015

Con tents
Highlight

Sindh Sales Tax on Services

Significant Amendments

New Services brought to tax

Scope of Services Enhanced

Punjab Sales Tax on Services

Significant Amendments

New Services brought to tax

Scope of Services Enhanced

This Memorandum contains a summary of changes proposed in the Sindh Sales Tax
Act and Punjab Sales Tax Act through the Provincial Finance Bills for 2015-16.
The Memorandum contains the comments, which represent our interpretation of the
legislation, and we recommend that while considering their application to any
particular case, reference be made to the specific wordings of the relevant statutes.

Highlight

Sindh Sales Tax

Punjab Sales Tax

Sales tax rate continues to be 16%

New services brought to tax ambit including


air travel services, where FED is already
applicable

Standard rate of tax proposed to be reduced


from 15% to 14%.

Rate of tax on telecommunication services


to be decreased from 19.5% to 18%.

Sales tax rate on services of program


producers and production houses to be
reduced from 10% to 6%.

Scope of tax enhanced in numerous


services through amendments proposed in
Second Schedule

Lowest slab of tax rate to be enhanced from


5% to 6%.

PRA to be empowered to levy tax through


rules and circulars.

16 new services to be brought into tax net at


standard or reduced rate.

Statutory period of retention of records


enhanced from 5 to 6 years

Levy of tax through broadening of the


definitions proposed.

Levy of tax through withdrawal of exemption


on Utility Bills Collection proposed.

Power of SRB officers enhanced.

Penalties in certain offences enhanced.

Right of appeal against suspension of


registration introduced.

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Sales Tax on Services 2015-16

Sindh Sales Tax Significant


Amendments
Tax Rate

Reduction in tax rates

Description

Standard rate of sales tax is proposed to be


reduced from 15% to 14%.
Further, reduction in following sales tax rates
have been announced which shall be notified
through notification:
Tax Rate
Description
Telecommunication
Services
Services provided by
program producers
and production
houses

Existing

Proposed

19.5%

18%

10%

6%

Proposed

Corporate law
consultants

5%

6%

Services of inter-city
transportation or
carriage of goods by
road, pipeline or
conduit

5%

6%

New services brought to tax net

Sales Tax rates enhanced


Sales tax rates on following services are
proposed to be enhanced under Second
Schedule and through notification:
Tax Rate
Description

Existing

Existing

Proposed

Other tracking services

15%

18%

Security alarm services

15%

18%

Legal practitioners and


consultants

5%

6%

Accountant and
auditors

5%

6%

Tax consultants

5%

6%

Construction services

5%

6%

Sales Tax on Services 2015-16

Following new services are proposed to be


inserted in Second Schedule and taxable at
standard rates:
Description

Rate

Services provided or rendered by


laboratories other than the services
relating to pathological, radiological
or diagnostic tests of patients.

14%

Credit rating agency *

14%

Futures brokers *

14%

Underwriter *

14%

Indenters *

14%

Commission agents *

14%

Packers and movers

14%

Erection, commissioning and


installation services *

14%

Technical inspection and certification


services, including quality control

14%

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Description

Rate

Description

certification services and ISO


certifications *
Valuation services, including
competency and eligibility testing
services.

Description

Rate

Travel agents *

10%

Renting of immovable property *


services excluding

6%

Renting of buildings solely used


for residential or hostels of a
recognized educational
institutions.

10%

Scope of services enhanced


Scope for taxation of following services
proposed to be enhanced by amending
definitions:

Advertising agent to include Media buying


house.

Share transfer agent to include Share


depository agent and services in relation to
transfer or redemption of derivatives

Banks, NBFC and NADRA Technologies Ltd


were exempted from levy of sales tax on Utility
Bills Collection under SRB notification dated 18
June 2013.

Renting of vacant land or


premises solely used for
agriculture, farming forestry,
mining, etc.
Renting of land or premises
solely used for outdoor sports

Intellectual property services *

Exemption for collection of utility


bills withdrawn

Renting of immovable property


by a religious body to another
religious body.

6%

* New services are proposed to be defined.

Following new services are also proposed to be


inserted in Second Schedule which shall be
notified at the following reduced rates.

Ready mix concrete services *

14%

* New services are proposed to be defined.

Rate

It is proposed to withdraw this exemption with


effect from 1 July, 2015 through notification.

Minimum tax liability


Upon failure to file return on due date or fail to
furnish any information, etc., an officer of SRB
not below the rank of Assistant Commissioner is
empowered to make assessment and determine
the minimum tax liability of a registered person.
However, final tax shall be determined as a
result of audit or special audit or forensic audit.

Renting of immovable property


by hotels, motels, guest houses,
etc. liable to tax under heading
98.01.

Auctioneers *

10%

Dredging or desilting services *

10%

Power of SRB officers enhanced


Presently, the power to suspend the registration
of a person rests with the Board. The Bill
proposes to empower any officer of SRB,

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Sales Tax on Services 2015-16

subject to the authorization of the Board, to


suspend the registration of a person.
Further, the Bill proposes to allow an appeal
before Commissioner (Appeals) in the case of
suspension of registration.

Audit by Special Audit Panels


The Bill proposes introduction of special audit
panel where the Board may appoint audit panels
comprising of two or more members from the
following:
An officer of the SRB

Chartered Accountants

Cost and Management Accountants

Any other person appointed by the Board

Such audit may be carried out jointly with the


FBR or other provincial sales tax authorities.
Under each special audit, officer of the SRB
shall act as chairman of the audit panel.

Penalties enhanced
Following penalties are proposed to be
introduced:
Offences

Penalties

Any bank fails to attach


or delays in attaching the
bank account.

Higher of Rs.
100,000 or double
the amount of tax
sought

Any person contravenes


any of the provisions of
the rules or notification.

Higher of Rs.
50,000 or double
the amount of tax
sought

Obligation to produce documents


and provide information

Penalties

Any person fails to


intimate any change in
the particulars of
registration.

Upto Rs. 100,000,


subject to
minimum penalty
of Rs. 10,000

Any person obstructs the


entry of the SRB officer
for monitoring

Higher of Rs.
100,000 or twice
the amount of
minimum tax
Higher of Rs.
100,000 or an
amount of the tax
sought

Any person violates any


embargo placed on the
economic activity.

Offences

Sales Tax on Services 2015-16

Presently, the power to require document or


information which are only being maintained
under Sindh ST Act.
The Bill proposes to empower SRB officer to
require from any person to also produce records
being maintained under any other law for the
time being in force.

Recovery of arrears of tax through


banks
Presently, the SRB officer is empowered to only
attach the bank account of the person.
Now, the Bill proposes to further empower SRB
officer to require from the bank through notice to
not only attach the bank account of the person
but also remit the amount sought to be
recovered.
The SRB officer is also empowered under the
proposed Bill to place an embargo on the
economic activity of the person till the amount of
tax is paid or recovered.

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Punjab Sales Tax Significant


Amendments

Sales tax rate continues to be


16%
Standard rate of Punjab Sales Tax (PST)
continues to be 16% on taxable services listed in
Second Schedule to Punjab Sales Tax on
Services Act, 2012 [Punjab Act].

New services brought to tax ambit


Following services are proposed to be inserted
in Second Schedule and taxable at standard
rate:
Description

Rate

Services in relation to transport of


goods other than water, through
pipeline, conduit or any other
medium (other than inland carriage
of goods by road otherwise taxable
or chargeable to tax as such)

16%

Service provided by person for intercity carriage of goods by rail or road


excluding Service provided by an
individual owner of a vehicle for
carriage of goods

16%

Services in relation to supply of


tangible goods including machinery,
equipment and appliances for use,
without transferring right of
possession and effective control of
such machinery, equipment and
appliances.

16%

Public relation services including


communication services and
services provided by public relations
of media management businesses,
communication specialists, media
researchers, and services provided
by opinion poll agencies.

16%

Description

Rate

Services provided by accountants


(including practicing chartered or
cost accountants), auditors,
actuaries, tax consultants (by
whatever name called), practicing
company secretaries, receivers,
liquidators, auctioneers and
corporate law consultants, whether
individual or otherwise.

16%

Domestic transportation of goods by


air (other than courier services
otherwise taxable or chargeable to
tax as such)

16%

Chartered flights services within or


originating from Punjab

16%

Debt collection and similar other


recovery services

16%

Supply chain management or


distribution (including delivery)
services

16%

Services provided by photography


studios and event or occasion
photographers/film makers excluding
Non corporate (individuals)
photographers operating from small
road-side shops declared as such by
the Authority.

16%

Visa processing services including


advisory or consultancy services for
foreign education or for migration,
visa application filing, services
provided by document collection
centers and subsequent assistance
in visa processing (including all
ancillary services)

16%

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Sales Tax on Services 2015-16

Description

Rate

Sponsorship services

16%

Following new services are also proposed to be


inserted in Second Schedule which shall be
notified at the following reduced rates.
Description

Scope of services enhanced /


amended

Scope of catering services is enhanced to


include ancillary or allied services such as
floral or other decoration, furnishing of space
whether or not involving rental of equipment
and accessories.

Rate

Facilities for travel (by air):

services provided or rendered


in respect of travel by air of
passengers embarking from
Punjab for air travel or journey
within the territorial jurisdiction
of Pakistan

Long routes

2,500/ti
cket

Short routes

1,500/ti
cket

Franchise services

Construction services
The exclusions available to the following are
proposed to be abolished:

Club, business and first


class

10,000
/ ticket

Sales Tax on Services 2015-16

The scope of courier services is proposed to


be enhanced to include express cargo or
logistic services.

5,000/
ticket

Construction projects of value


exceeding Rs 50 million

Construction of industrial zones and


other organizations exempt from income
tax

Residential construction projects where

Air travel services provided to Hajj


or Umrah passengers, diplomats
and supernumerary crew.

Courier services

The Franchise services is proposed to


include licensing services.

Economy and economy


plus

Exclusion:

services provided or rendered


in respect of travel by air of
passenger embarking from
Punjab for international air
travels for journey:

Advertisement services
The exclusion of advertisement services on
television and radio financed out of funds
provided by Government under an
agreement of foreign grant-in-and is
proposed by substitution.

Explanation: - For the purpose of


this entry long routes means
journey exceeding 500 kilometers
and short routes means the
remaining journeys.

Catering services

construction services are provided to


construct more than one house or more
than one apartment building

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Property developers/promoters

claim processing, online retrieval and


database access or retrieval service

The bill proposes to bring in builders in the


tax net.

Personal care

The scope of services provided by other


consultants is proposed to be enhanced to
include whole range and variety of services
provided by event managers, evaluation
services, certification, verification and
equivalence services, marketing or sales
services (including marketing agencies and
online marketing or sales services), surveyor
services, training or coaching services (other
than general education services).

The scope of services pertaining to personal


care is proposed to be enhanced to include
salons, spas (including saunas, Turkish
baths and Jacuzzi) and similar other
establishments and hair transplants.
However, the exclusion has been limited to
parlor, salon and clinic where the facility of
air-conditioning is not installed or is not
available in the premises on any day of the
financial year.

Freight forwarding agents

IT services
The scope of IT services is proposed to be
massively enhanced to include Information
technology-enabled or information
technology based services including
software development, software
customization, software maintenance,
system support, system assembly, system
integration, system designing and
architecture, system analysis, system
development, system operation, system
maintenance, system up-gradation and
modification, data warehousing or
management, data entry operations, data
migration or transfer, system security or
protection, web designing, web
development, web hosting, network
designing, services relating to enterprise
resource or management planning (including
marketing of products}, development and
sale of smart phone applications or games,
graphics designing, medical transcription,
remote monitoring, telemedicine, insurance

Share registrar
The scope of services provided by share
registrars is proposed to be enhanced to
include services pertaining to issuance of
shares. Furthermore, investor account
services, trustee or custodial, share registrar
services and their allied or connected
services pertaining to transfer of shares,
securities and derivatives have also been
brought into the tax ambit.

The sales tax in case of Freight Forwarding


Agents is proposed to be increased from Rs
400 to Rs. 1000 per bill of lading

Other consultants

Fashion designer
The scope of services provided by fashion
designers is proposed to be enhanced to
include use of brand name, logo or house
mark (whether or not registered in the
manufacturing or trading of products)

Architect and town planners


The scope of services provided by town
planners is proposed to be enhanced to
include landscapers and land scape
designers.

Rent-a-Car
The scope of services provided in respect of
rent a car is proposed to be enhanced to

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Sales Tax on Services 2015-16

57

include renting of all categories of vehicles


meant for transportation of persons

Medical laboratories
The bill proposes to restrict the exclusion
provided in respect of services relating to
pathological or diagnostics tests done by
laboratories only to tests specifically
pertaining to medical treatment purposes.

Power to levy sales tax through


rules / circulars
The Bill proposes to empower PRA to levy sales
tax through rules and circulars. Presently,
Government of Punjab is empowered to levy
sales tax through notification.

PRA empowered to appoint


Special Auditors
Section 34 empowers Punjab Revenue Authority
(PRA) to appoint Chartered Accountants and
Cost & Management Accountants for conducting
special audit of record of a registered person.
The bill now seeks to empower PRA to appoint
the professional accountants to conduct a
Special Audit and Forensic Audit.

Incentive to promote tax culture


The Bill proposes to empower PRA (subject to
approval form the Provincial Government) to
prescribe prize schemes to encourage the
general public to make purchases only from
registered persons issuing tax invoices.

Reward for Whistleblowers

Penalties enhanced
The bills proposes to change the penalty as
follows:
Under Sr. No. 5 following penalties are proposed
to be introduced in case a person fails to
produce record or information despite receipt of
notice.
Rs. 25,000 First default

The Bill proposes to introduce a new concept of


whistleblower, who is proposed to be the one
who reports cases of concealment, evasion of
sales tax or fraud leading to detection or
collection of the tax
The Bill seeks to propose rewards for
whistleblower, however, the procedures for
claim of such reward are expected to be
prescribed.

Rs. 50,000 each subsequent default


Under Sr. No. 1, minimum penalty is proposed
to be enhanced from Rs. 10,000 to Rs. 100,000
for the Company and from Rs. 10,000 to Rs.
50,000 for a person other than Company in case
of non-compliance of compulsory registration.

Time of retention of records


enhanced
The bill proposes to extend the period of
retention of record from 5 to 6 years.

Sales Tax on Services 2015-16

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

An Economic & Budget Commentary

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Phone +92 (51) 282 3558
Fax
+92 (51) 282 2671
eMail pk-fmislamabad@kpmg.com
www.kpmg.com.pk

2015 KPMG Taseer Hadi & Co., a Partnership firm registered in Pakistan and a member
firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavour to provide
accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No
one should act on such information without appropriate professional advice after a thorough
examination of the particular situation.
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