Sales tax through provincial ordinances: 16 percent levy likely on wide range of services

The government may levy 16 percent sales tax in coming 2009-10 budget on services provided by port/terminal operators on import cargo handling; banking companies and non-banking financial companies; insurance companies and professional service providers like legal/medial practitioners and a wide range of consultants through Provincial Sales Tax Ordinances.
It is learnt that the Federal Board of Revenue (FBR) has proposed a comprehensive list of service providers to the Ministry of Finance for consideration under the Provincial Sales Tax Ordinances. The list also includes services provided by professional service providers, like legal consultants and different categories of consultants operating in key potential sectors.
If the government levies 16 percent sales tax on these services through Provincial Sales Tax Ordinances, the FBR will have to withdraw excise duty from non-fund services provided by banking and non-banking financial companies, etc, and other services presently liable to excise duty.
According to sources, sales tax through Provincial Sales Tax Ordinances might replace the existing excise duty on some services. In this connection, the FBR has worked out the revenue implications, enforcement and compliance issues of the services for broadening the tax base.
The FBR has finalised the list of potential service providers for bringing them into the tax net. The FBR reviewed the list of services specified in the Chapter-98 of the Pakistan Customs Tariff (PCT) of the Customs Act, 1969. The definition, classification and nomenclature of services have been given in the Chapter-98 of the PCT.