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February 16, 2020

Provinces collect Rs110bln in sales tax on services

Business

February 16, 2020

KARACHI: Provincial collection of sales tax on services rose 20 percent to Rs110 billion during the first half of the current fiscal year of 2019/20 as provinces tapped new revenue stream during the period, official data showed.

Finance ministry’s data showed that all the four provinces collected Rs92 billion in sales tax on services in the corresponding half of the last fiscal year.

Punjab posted a 21 percent growth in the tax collection to Rs50 billion in July-December 2019/20. It collected Rs41.42 billion in the corresponding period a year earlier. The growth in revenue collection may be attributed to the restoration of sales tax on services on phone services, which was stopped on the orders of the Supreme Court of Pakistan.

The apex court in a suo motu notice suspended the collection of sales tax on phone services in June 2018. Later in April 2019, the court restored all taxes on cellular service providers.

Sindh province managed to exhibit a 8.63 percent growth in revenue under the head to Rs47.17 billion despite restoration of sales tax on phone services. The province collected sales tax of Rs43.42 billion in the corresponding half of the last fiscal year

Revenue collection by Khyber Pakhunkhwa, however, registered 83 percent growth. The province collected Rs8.16 billion compared with Rs4.46 billion.

Balochistan posted 95 percent growth in revenue to Rs4.54 billion. In July-December FY2019, the collection was Rs2.33 billion.

Provinces were empowered to collect sales tax on services under the 18th amendments into the constitution in April 2010. Sindh was the first province to make legislation for imposing sales tax on services within its jurisdiction in 2010.

Since then all the provinces have now established their revenue authorities to collect tax on services rendered within their jurisdictions.

The country is heavily dependent on the tax revenue to bridge the fiscal gap. The collection of the Federal Board of Revenue (FBR) posted a 16.6 percent growth to Rs2.093 trillion in the first half.

However, budget deficit for first half of the current fiscal year narrowed at 2.3 percent from 2.7 percent in the same half of the last fiscal year due to better revenue collection by federal and provincial authorities.

In July-December, FBR’s tax collection was less than the target of Rs2.198 trillion. FBR needs to collect Rs5.238 trillion in the current fiscal year. The target was revised downward from Rs5.503 trillion.

The apex tax authority is likely to face a shortfall of more than Rs750 billion during the current fiscal year of 2019/20 as economic sluggishness pinned down revenue growth.