The government of Khyber Pakhtunkhwa has issued notification on budget dated August 4, 2014 regarding certain amendments in the Khyber Pakhtunkhwa Finance Act 2013, regarding imposition of Sales Tax on Services in the province. Under this notification, a large number of new services has been added to the second schedule to the Sales Tax law as part of this year's revenue budget proposals.
The services now added include services rendered by specialised agencies, security companies, shipping agents, freight forwarding agents, Tour operators, manpower recruitment agents, manpower supply services, services provided by industrial and construction machinery, advertising agents, business support services, share transfer agents, property dealers, real estate agents and planners, automobile dealers and works, franchise services, manufacturing and processing on toll bases, contract execution, architects and planners, management consultants, construction services of various kinds, technical and engineering consultancies, port operation services, tracking services, motor vehicle workshops, mining of minerals, exploration of oil and gas related services, event management and exhibition services, event photo and videographers, public bonded ware houses, container terminal services, copy right services, cosmetic and plastic surgery, sale of space for advertisement services, sound recording and video services, TV, Radio production house services, services rendered by clubs and broadcasting services.
The most important aspect of this notification is reduction in the tax rate of some of the services but without any input adjustment. This will reduce the inflow of duplicate or incorrect claims by the services for input adjustment against the tax payable on the services provided by the registered persons.
Besides, certain other groups of services like slimming and health clubs, restaurants, marriages halls etc have also been brought to the tax net and clarifications have been issued. The proposal will broaden the tax net of services in the province and expected to substantially increase the Sales Tax on Services revenue by Khyber Pakhtunkhwa Revenue Authority (KPRA) that was established in July last year for imposing the sales tax on services sectors.
The KPRA will start the awareness and facilitation scheme for enrolment of the service providers falling in the abovementioned categories and those already assessed to sales tax under the 2013 Act such as agents of various kinds, financial services like banking and insurance, beauty parlours, dry cleaners, telecom services, courier services, advertising, customs agents and stock brokers etc.
The KPRA has been assigned the collection target of Rs 12 billion for the current year while during last year sales tax on services amounting to around eight billion was collected, which is the highest margin of increase against any other revenue authority of the country.-PR