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Provinces, Centre agree on GST on four services

By Mehtab Haider
March 29, 2023

ISLAMABAD: In a bid to comply with the World Bank’s loan condition of RISE-II, the Centre and four provinces have evolved a broader consensus over the place of supply rules for advertisement services, insurance services, franchise services and transportation services for harmonization of GST on services.

Now the National Tax Council (NTC) is expected to hold its meeting under the chairmanship of Minister for Finance Ishaq Dar in the coming days in order to grant final assent to the agreed rules on four major services within the provinces as well as in the Islamabad Capital Territory (ICT) for the Federal Board of Revenue (FBR).

The lack of harmonization of GST among the Centre and the provinces has remained a major stumbling block in the way for approval of the Resilient Institutions for Sustainable Economy (RISE-II) loan of $950 million from the World Bank and AIIB. The relevant parties made last-ditch efforts to evolve a consensus on the definition of goods and services, bringing uniformity related to GST laws, tax rates, and scope of GST.

Top official sources confirmed to The News on Tuesday that the FBR agreed to the consensus arrived at by the Provincial Finance Departments and Provincial Revenue Authorities (PRAs) on supply rules for four major services as it would be a step forward on a long outstanding issue, which would distinctly improve Pakistan’s standing on the Ease of Doing Business Index.

All the provincial representatives and chairman FBR recorded their consent to the recommendations of the ECNTC on the framework of the Place of Supply Rules.

Under the agreed rules on advertisement services/advertising agents in the case of an advertisement on TV, the location of beaming station has been agreed upon as a consensus point for taxation. For radio advertisements, the location of radio station will become the basis for taxation. The location of the hoarding site and billboard will be determined as a basis for the taxation of advertisements on the still media. Similarly, for advertising agent services, the location of the advertisement agent office/branch would be determined for taxation.

For insurance services such as life/health insurance, the location of the office/branch providing the service will serve as the basis for taxation purposes. For insurance of immovable property, the location of the immovable property would serve as the basis for taxation purposes.

For the Insurance Agent, the location of the agent, re-insurance-imported there will be the location of the recipient insurance company. For re-insurance, the local location of the office/branch providing the reinsurance service will be used for taxation purposes.

For franchise imported services, the location of the franchise would be used for taxation purposes. For local franchise, the location of the Franchise/Sub-Franchise will be used for imposition of GST.

For transportation of goods other than petroleum services provided by companies, a 50% tax will be imposed on basis of origin and 50% on the basis of destination.

On transportation of goods other than petroleum services provided by non-companies, the location of the booking office will be used for taxation purposes. On transportation of goods through pipeline or conduit and transmission through the electrical grid, there will be a 50 percent tax on basis of origin and 50 percent on the basis of destinations.

The sources said that Balochistan and Khyber Pakhtunkhwa requested that data on TV advertisements may be shared by the Governments of Punjab and Sindh with both the Governments of Balochistan and Khyber Pakhtunkhwa. It was also decided that the governments of Punjab and Sindh will share the requested data.

It was also proposed that if the National Tax Council approves the framework for Place of Supply Rules, it would have no bearing on any ongoing litigation.