Sindh Revenue Board (SRB) has rejected Pakistan Hosiery Manufacturers and Exporters Association's (PHMEA) demand to rescind the 19.5 percent sales tax on security systems and services. Well-informed sources in SRB told Business Recorder on Wednesday that PHMEA had appealed to the SRB urging it to rescind the 19.5 percent sales tax on security systems and services.
A letter written by PHMEA a few days ago to Sindh Finance Minister, a copy of which is available with Business Recorder, states: "We are constrained to invite your kind attention to the most unjustified imposition of 19.5 percent Sales Tax by the Sindh Revenue Board on security systems and services installed/maintained by the heavily burdened and harassed industrial units. It is indeed a great irony that these industrial units, majority of which are 100 percent export oriented, are generating massive employment and earning huge amount of foreign exchange for the nation, face the most serious law and order situation, a total lack of security and helplessness just because the government, which is required to assure every kind of safety and security, is lacking in providing this most important right of a citizen. While punishment has been imposed by the government in the form of most exorbitant and unjustified 19.5 percent Sales Tax charged on the security systems and services providers who in turn charge the same from the industrial units which arrange security through them."
The PHMEA says in the letter that it is pertinent to note here that the Security Services and Systems have mushroomed in our country only because of a feeling of total lack of security. In the context of the law of demand and supply, they have multiplied just because there is a great demand for them due to the deteriorating law and order situation. If the government ensures foolproof security then there will be no need of Security Services and Systems.
"We, therefore, most fervently appeal to your good self that in view of the above and the most grave and rapidly deteriorating law and order situation when we are forced to arrange the security services and systems which greatly adds to the already rising cost of doing business in Pakistan, to kindly rescind this unjustified 19.5 percent Sales Tax on Security Systems and Services forthwith and give some breathing space to the dying industries," the letter demanded.
However, the SRB has refused to entertain the PHMEA demand. In a letter, it states: "Services provided or rendered by a Security Agency (eg, security guards or security escort) are covered by tariff heading 9818 1000 of the First Schedule of the Sindh Sales Tax on Services Act 2011, and are not taxable, having been not included in the Second Schedule thereof. The telecommunication-based vehicle tracking service (tariff heading 9812.9490) and the burglar alarm service (tariff heading 9812 9500) are taxable services in terms of section 3 of the Sindh Sales Tax on Services Act 2011, read with the Second Schedule thereof."
However, the tax on these telecom-based services were levied at 19. 5 percent even under the Federal Excise Act 2005, and continue to be levied in areas other than Sindh. Therefore, this is neither a new levy under the Sindh Sales Tax on Services Act 2011, nor is there any discrimination as against the levy (in the form of FED) in areas where the said 2011-Act does not apply," the letter added.
The Sindh Sales Tax on the telecom-based services (tariff heading 9812.9490 and 9812.9500) can be claimed for input tax adjustment/credit under section 7(1), read with section 2(14) (d) of the sales tax Act 1990. Accordingly, there is no additional burden on the registered persons (whether dealing with taxable goods and/or zero-rated goods) who pay the Sindh Sales Tax on these services used as their inputs," the letter concluded.
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