In Pakistan, the Sales Tax on Services (SToS) is an indirect tax imposed on various services provided in the country. The Federal Board of Revenue (FBR) regulates and collects the tax under the Sales Tax Act of 1990. The SToS applies to services provided by both residents and non-residents of Pakistan, and the tax rates may vary depending on the nature of the services.
Services Subject to Sales Tax
The Sales Tax on Services applies to a wide range of services including, but not limited to:
- Advertising services
- Banking services
- Consultancy services
- Educational services
- Engineering services
- Health services
- Insurance services
- Legal services
- Maintenance and repair services
- Printing and publishing services
- Restaurant and catering services
- Telecommunication services
- Transportation services
- Travel and tour services
- Sales Tax Rates on Services
The tax rate for Sales Tax on Services in Pakistan is 17%. However, certain services have been exempted from the tax or may be subject to a reduced tax rate. For instance, educational and health services are exempt from Sales Tax, while banking and financial services are subject to a reduced tax rate of 15%. Similarly, transporting goods by rail or air within the country is exempt from the tax, while transporting goods by road is subject to a reduced tax rate of 5.5%.
Bonus Tip: You can use Pakistan Tax Calculator tools for quick and accurate tax calculation.
Sales Tax Registration for Service Providers
Pakistan service providers must register with the FBR for Sales Tax purposes if their annual turnover exceeds Rs. 7.5 million. Registered service providers must charge Sales Tax on their services and file regular Sales Tax returns with the FBR. Failure to register for Sales Tax purposes or to charge and pay Sales Tax can result in penalties and legal action by the FBR.
Sales Tax Collection and Payment
Service providers must collect Sales Tax from their clients and deposit it with the FBR every month. The Sales Tax collected is offset against the Tax paid on input services and goods purchased to provide the services. Any excess Sales Tax collected is remitted to the FBR as a tax payment.
Sales Tax Audit and Enforcement
The FBR has the power to audit the Sales Tax records of service providers to ensure compliance with the Sales Tax Act of 1990. The FBR can review the service provider’s Sales Tax returns, invoices, and other relevant documents during an audit. In cases of non-compliance, the FBR may impose penalties and initiate legal proceedings against the service provider.
Conclusion
The Sales Tax on Services is an important revenue source for the Pakistan government. The FBR collects it from various service providers in the country. The tax rate for Sales Tax on Services in Pakistan is 17%, but certain services may be exempt from the tax or subject to a reduced tax rate. Service providers must register with the FBR for Sales Tax purposes if their annual turnover exceeds Rs. 7.5 million, and failure to comply with the Sales Tax Act can result in penalties and legal action.
In conclusion, service providers in Pakistan need to understand their Sales Tax obligations and comply with the relevant regulations to avoid any legal or financial consequences.