KARACHI: Collection of sales tax on services by the Sindh government climbed 33 percent to Rs28.45 billion during the first half of 2015/16 fiscal year as the rate cut gave a boost to the tax payment culture, a senior official said on Thursday.
The Sindh Revenue Board (SRB) collected Rs21.39 billion in the corresponding period of the fiscal year of 2014/15.
“The reason of increase was reduction in tax rates, which always has the dynamic effect of increasing tax yield as it increases tax compliance and cost of evasion, boosts taxpayers' confidence and induces correct declaration of turnover,” the official said on condition of anonymity.
“The proximity of taxpayers with the tax administration encourages prompt responses, increases interaction and better understanding with least cost on travel and time.”
The provincial government reduced the sales tax on telecommunication services to 18 percent from 19.5 percent, while the tax rates on other services were brought down to 14 percent from 15 percent.
The official said the sales tax on services is collected from all terminal operators, banks and financial institutions, insurance and telecom sector.
Sindh government set the target for sales tax on services at Rs61 billion for the current fiscal year.
The tax official expressed his confidence of achieving the target.
“The target will be achieved as it is evident from the first half growth,” he said. “Usually, the maximum collection is done in the last quarter.”
The provincial government has been collecting sales tax on services since 2011. The tax collection authority was relegated to the province from the federal government after the National Finance Commission award 2010.
Significant growth in tax collection was also witnessed in all the sectors.
The third largest sales tax contributor was telecommunication sector with Rs3.45 billion in the first half of 2015/16 as against Rs3.04 billion in the same period a year ago.
Sales tax collection from banks rose to Rs2.93billion from Rs2.13 billion earlier. Tax collection from contractors was Rs2.73 billion as compared to Rs1.34 billion.
The SRB racked up Rs12.35 billion under miscellaneous taxable services in July-December 2015/16 as compared to Rs10.20 billion in the same period a year ago.
A huge surge was witnessed in withholding tax as collection from withholding agents increased to Rs3.23 billion in the first half as compared to Rs1.82 billion in the comparable period.
The official said SRB ensures that taxpayers' queries are responded within 24 hours via e-mail and within a week by postal mail.
“Tax payment, return filing and tax compliance formalities are all electronic, procedures are simplified and the physical interaction between taxpayers and tax collectors are minimal and not encouraged,” he added.
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