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August 15, 2020

Rs233 billion COLLECTION: Sales tax on services post 15pc growth in FY2020

Business

August 15, 2020

KARACHI: Sales tax collection from services rose 15 percent during the last fiscal year of 2019/20 despite economic slowdown worsened by the coronavirus-related lockdown for almost five months, according to latest official stats.

The combined collection of sales tax on services by all the four provinces increased to Rs233 billion in FY2020 compared to Rs203 billion in the preceding fiscal year.

The government this week lifted lockdown that was imposed in late March, adversely affecting the ailing economy. The economy contracted 0.4 percent last fiscal year compared 3.3 percent in the preceding fiscal year.

Sources said the economic slowdown early in the year under review and halt of financial and commercial activities during the lockdown adversely affected the sales tax collection on services.

According to the statistics released by the federal finance ministry, the ratio of sales tax on services collection to the GDP remained at 0.56 percent during the fiscal 2019/20, which was slightly up 0.52 percent year-over-year.

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

Since then all the provinces have now established their revenue authorities to collect tax on services rendered within their jurisdictions. The Punjab province posted growth of 17 percent in revenue collection for the fiscal year 2019/20. The province collected Rs105.55 billion in 2019/20 compared with Rs90.217 billion in the preceding fiscal year.

The collection by Sindh Revenue Board (SRB) posted 7 percent growth in revenue collection to Rs99.82 billion compared with Rs93.512 billion in the preceding fiscal year. The revenue collection of Khyber Pakhtunkhwa posted a significant growth of 64 percent during the fiscal year under review. The province collected Rs17 billion compared to Rs10.35 billion in the preceding fiscal year. Balochistan registered 21 percent growth in collection of sales tax on services during the fiscal year under review. The province collected Rs10.63 billion compared with Rs8.8 billion in the preceding fiscal year. The overall revenue collection of the country witnessed adverse impact of the coronavirus and the collection of Federal Board of Revenue. The federal revenue collection grew only 4.4 percent during the fiscal year under review. The FBR collected Rs3.9 trillion during FY2020 compared to collection of Rs3.8 trillion in FY2019.

The initial revenue collection target for FBR was set at Rs5.5 trillion for FY2020. However, considering the massive adverse impact of coronavirus on the economy the collection target was revised downward to Rs3.9 trillion.