New services brought under sales tax net

LAHORE

The Punjab Revenue Authority has stated that with the commencement of Financial Year 2014-15, the Punjab government had brought several new services under the Punjab sales tax net at the rate of 16 percent. Most of these services are related to largely unregulated and undocumented sectors concerning small businesses.

This was disclosed by the Member Operations Punjab Revenue Authority Raza Munawar. 

He said all these services were brought under the tax net for the first time therefore their compliance on field entailed resistance from trade bodies and concerned business associations, sometime leading to occasional street agitation.

The Punjab Revenue Authority (PRA) held detailed meetings with a number of these associations and respective trade bodies from time to time. These included representatives of dry cleaners, gyms, property dealers (real estate agents), tour operations and travel agents, automobile dealers, constructors association etc. The main demand of these representative associations and trade bodies had been for reduction of Punjab sales tax rate to alleviate hardships on small businesses. The Punjab Revenue Authority examined the demand of the representative associations and advised the government that a reduced rate scheme (without any input adjustment) might be viable for improving the compliance in otherwise unregulated sectors.

He said that in the Resource Mobilisation Committee (RMC) meetings held in March and April 2015, the PRA brought a proposal to reduce the rate of sales tax for certain small standalone and non-corporate businesses with a view to ensuring smooth transition from traditional delinquency to voluntary compliance to extract tax from services which had not contributed anything in the past and help develop a useful database for future policy formulation including upward review of the reduced tax rate. Th PRA had identified 12,127 businesses belonging to 11 service sectors from data made available through FBR, websites and district-wise non-intrusive surveys. It was estimated that if these 11 services were brought into the tax net through a reduced rate scheme, substantial revenue could be realised. However, the reduced rate scheme shall be time-bound and will remain operative only for a transitional period of one year with further possible extension till market generally becomes acclimatised and responsive enough to discharge obligations under the standard tax regime.

The member operations further stated that after a necessary approval by the Punjab chief minister, the finance department had today notified the reduced rates ranging from two percent to 10 percent for services provided by the standalone non-authorised segment of laundries and dry cleaners, car/automobile dealers, auto-workshops and by workshops for electric or electronic equipments or appliances, gyms and physical fitness, construction services (with aggregate value of less than 50 million). Moreover, across-the-board reduced rate has been made available for franchise service, services provided by accountants, auditors, actuaries, tax consultants, company secretaries, receivers, liquidators, auctioneers and corporate law consultants, tour and travel agents and services provided to the textile or leather sectors in respect of manufacturing or processing on toll or job basis (against processing on conversion charges).