COMPARATIVE STUDY
AND SCOPE OF SALES
TAX ON SERVICES
Pakistan Tax Bar Association &
Karachi Tax Bar Association
Adnan Mufti FCA
2
VAT / GST
Regimes across the
Globe
3
Currently, there are 160 countries in the world that have implement VAT / GST.
Number of country based on region are as follows:-
No.
Region
No. of Country
1
ASEAN
7
2
Asia
19
3
Europe
53
4
Oceania
7
5
Africa
44
6
South America
11
7
Caribbean, Central & North America
19
4
Countries working towards VAT / GST *

Afghanistan

Principe

Bahamas

Syria

Bhutan

Bahrain

Kiribati

Kuwait

Marshall Islands

Qatar

Micronesia

Saudi Arabia

Palau

Oman

Sao Tome

United Arab Emirates

China

India
* Source: Malaysian Tax Authority
5
SCOPE OF SALES
TAX ON
SERVICES –
INTERNATIONAL
PRACTICES.
6
Pakistan
Services liable to sales tax, if they are specifically listed and taxed under the respective Provincial statutes.
Except for Punjab & Khyber Pakhtunkhwa, services are solely taxable on the basis of origin, i.e., in the
Province / Territory in which the service originates.
India
Service tax is applicable on the supply of services provided in a taxable territory.
W.e.f. July 2012, service tax is levied on all services, other than those specifically exempt under the
negative list. With the introduction of negative list, all definitions of ‘services’ which were earlier provided
in the law have become redundant.
Australia
GST is applicable on taxable supplies of goods and services, which are supplied in Australia and made for
consideration in the course of a business enterprise by an entity that is registered or that is required to be
registered for GST.
7
Canada
Canada’s federal government imposes a 5% sales tax known as the Goods and Services Tax (GST). When a
supply is made in a “participating province,” the tax rate includes an additional provincial component of
7%, 8% or 10%, depending on the province. The combined 12%, 13% or 15% tax is known as the
Harmonized Sales Tax (HST).
France
VAT applies to the supply of goods or services performed in France by a taxable person and intraCommunity acquisition of goods from another EU member state by a taxable person.
Japan
Consumption tax applies to the supply of goods or services made in Japan by a taxable person and
importation of goods into Japan.
Malaysia
Sales tax is a single-stage tax, applied to sales of locally manufactured taxable goods as well as to taxable
goods imported for domestic consumption.
8
European Union
•
Under the ‘Single Market’ rules, goods may move freely between member states without
hindrance, including customs controls. As a result, the concepts of “import” and “export” no
longer apply to cross-border trade between member states.
•
“Nontaxable persons” are any persons or legal entities that are not registered for VAT. VAT is
generally charged on supplies of goods made to nontaxable persons using the “origin
principle,” which means VAT applies in the member state where the supplier of the goods is
established. Consequently, VAT rate is the rate that applies to the goods in the supplier’s
member state, not the rate that would apply in the customer’s member state.
•
Business to-business (B2B) supplies of services are taxed at place where the customer is
located.
•
Business-to-consumer (B2C) supplies of services, the place of taxation continues to be where
the supplier is established.
9
New Zealand
GST applies to the supply of goods or services made in New Zealand by a registered person and
importation of goods into New Zealand, regardless of the status of the importer.
Phillipines
VAT applies to the taxable sale, barter, exchange, use or lease of goods or property by a taxable person,
taxable sale or exchange of services by a taxable person and taxable importation of goods from outside the
Philippines.
Turkey
VAT applies to the following transactions:
•
The supply of goods or services made in Turkey by a taxable person in the course of performing
commercial, industrial, agricultural or independent professional activities
•
Services received in Turkey or benefited from in Turkey by a taxable person or any other person
responsible for payment of the tax
•
Goods and services imported into Turkey
10
Singapore
Taxable supplies of goods and services in Singapore, made in the course of a business by a taxable person
and imports of goods into Singapore attracts GST.
United Kingdom
The supply of goods or services made in the United Kingdom by a taxable person, intra-Community
acquisition of goods from another EU member state by a taxable person, reverse-charge services received
by a taxable person in the United Kingdom and importation of goods from outside the EU attracts VAT.
USA
Sales tax is transaction-based tax, imposed on intra-state retail transactions (sales made between a buyer and
seller located within the same state), and are calculated as a % of the receipts derived from the transaction.
11
Singapore
Taxable supplies of goods and services in Singapore, made in the course of a business by a taxable person
and imports of goods into Singapore attracts GST.
United Kingdom
The supply of goods or services made in the United Kingdom by a taxable person, intra-Community
acquisition of goods from another EU member state by a taxable person, reverse-charge services received
by a taxable person in the United Kingdom and importation of goods from outside the EU attracts VAT.
USA
Sales tax is transaction-based tax, imposed on intra-state retail transactions (sales made between a buyer and
seller located within the same state), and are calculated as a % of the receipts derived from the transaction.
12
CONSTITUTIONAL
POSITION
&
COMPARATIVE
ANALYSIS OF
SERVICES TAXED IN
PAKISTAN
13
CONSTITUTIONAL POSITION
18th Amendment of the Constitution of Pakistan
Amendment XVIII (the Eighteenth Amendment) of the Constitution of Pakistan, was passed by the National
Assembly of Pakistan on April 8, 2010.
Under Entry No.49 of the fourth Schedule of the Federal Legislative List of the Constitution of Pakistan, as
amended under Eighteenth (18th) Amendment Act 2010, the authority of the provinces regarding Sales Tax
on Services has been accepted and re-asserted by adding the words "except Sales Tax on Services".
14
CONSTITUTIONAL POSITION
Entry No.49
“Taxes on the Sales and purchases of goods imported, exported, produced, manufactured or
consumed except Sales Tax on Services”.
Article 142 (C) of the Constitution has further fortified the authority of the provinces on imposition
and collection of the Sales Tax on Purchase and Sale of Services, which is reproduced as
under:
Article 142 (C)
"A Provincial Assembly shall and Mujlis-e-Shoora (Parliament) shall not have power to make
laws with respect to any matter not enumerated in the Federal Legislative List".
15
CONSTITUTIONAL POSITION
With the 18th Amendment and the 7th NFC award, sales taxation on services
jurisdiction has been reasserted and, for the first time, levy and collection rights
have been regulated and administered by the provinces.
Accordingly, the Provincial Assemblies of Sindh, Punjab & Khyber Paktunkhaw
enacted Provincial Sales Tax Laws in Year 2011, 2012 & 2013 respectively for
levy, collection and administration of sales tax on services provided, rendered or
supplied in respective Provinces.
A comprehensive list of services and service providers has been prescribed in
1st & 2nd Schedule of Provincial Laws for levy of sales tax. Constitutional
Position needs be defined and elaborated whether the Provinces can levy sales
tax on “services”, “service providers” or “both” !
16
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhawa
Services provided by hotels, clubs ,
caterers , restaurants, marriage halls and
lawns


¶ (restaurants,
marriage halls &
lawns excluded)
 (restaurants
excluded)
Advertisement on television & radio


¶

Advertisement on cable television


^

Advertisement poles, billboards and
others


^
O
Shipping agents


^
O
Stevedores


¶

Ship management services

O
O

Freight forwarding agents


O
O
17
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Customs agents


¶

Ship chandlers


¶

Advertising agents


O
O
Sponsorship services

O
O
O
Business support services


O
O
Services provided by property developer &
promoters


^
O
Courier services


¶

Contractual execution of work


O
O
Services provided or rendered for personal
care by beauty parlours, beauty clinics,
slimming clinics or centres and others


O

18
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Services provided by banks, financial
institutions insurances companies etc.


^

Architects & town planners


O
O
Contractors of building

O
O
O
Property developers and promoters


^
O
Legal practitioners

O
O
O
Accountants & auditors

O
O
O
Management consultants


O
O
Software or IT based system development
consultants


O
O
Tax consultants

O
O
O
19
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Security agency


O
O
Market research agency

O
O
O
Stock brokers and commodity brokers


^

Money exchangers


O
O
Surveyors

O
O
O
Outdoor photographers and video
graphers

O
O
O
Management consultants

O
O
O
Port operators, airport operators, airport
ground services & terminal operators


^
O
Auto workshops including authorized
service stations

O
O
O
20
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Workshop for industrial machinery,
construction and earth moving machinery
or other special purpose machinery

O
O
O
Health care centre, gyms or physical
fitness centres


O
O
Body massage centre


O
O
Pedicure centre


O
O
Franchise services


^
O
Construction services


O
O
Management services including fund &
asset management services


O
O
Airport services


O
O
21
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Tracking services

O
O
O
Security alarm services


O
O
Services provided by motels and guest
houses


O
O
Event management services

O
O
O
Public Bounded warehouses

O
O
O
Labour & manpower services

O
O
O
Toll manufacturing services


O
O
Race clubs

O
O
O
Technical, scientific & engineering
consultants
O

O
O
22
COMPARATIVE ANALYSIS
Services
Sindh
Punjab
Baluchistan & ISB
Capital Territory
Khyber
Pakhtunkhwa
Other consultants
O

O
O
Manpower & Recruiting agents
O

O
O
Services provided by tour operators
O

O
O
Services provided in relation to Exploration
& production
O

O
O
Share transfer services
O

O
O
Property dealers
O

O
O
Fashion designers
O

O
O
Rent a car
O

O
O
Car/automobile dealers
O

O
O
Telecommunication services


^

Laundries & dry cleaners
O
O
O

23
COMPARATIVE ANALYSIS
^ Classified as service under the Baluchistan Sales Tax on
Services Ordinance & Islamabad Capital Territory Sales Tax
on Services Ordinance 2001
¶ Administered under Federal Excise Act 2005
24
PECUILAR
SERVICES TAXED
IN SINDH &
PUNJAB
25
26
PECUILAR SERVICES
BUSINESS SUPPORT SERVICES
Tariff Heading 9805.9200
Sindh
Punjab
Section 2(19) of the Sindh Sales Tax on Services Act, 2011
Rule 27 of Punjab Sales Tax on Services (Definitions) Rules
2012
Services provided in relation to business or commerce
and includes evaluation of prospective buyers,
telemarketing, call centre facilities, accounting and
processing of transactions, processing of purchase
orders and fulfillment services, information and
tracking of delivery schedules, managing distribution
and logistics, customer relationship management
services, operational assistance for marketing,
formulation of customer service and pricing policies,
infrastructural support services and other transaction
processing.
Services provided in relation to business or commerce
and includes evaluation of prospective customers,
telemarketing, processing of purchase orders and
fulfillment services, information and tracking of
delivery schedules, managing distribution and
logistics, customer relationship management services,
accounting and processing of transactions, operational
assistance for marketing, formulation of customer
service and pricing policies, infrastructural support
services and other transaction processing.
27
PECUILAR SERVICES
BUSINESS SUPPORT SERVICES
Tariff Heading 9805.9200

Very broad definition and implications

Virtually includes every facet of economic activity which is supporting the operational
existence of any business

Guidelines from provincial tax authorities for clarity and better understanding awaited

Reimbursable expenses appear to be non deductible. Hence, service may be taxable on “gross
value” charged to the customers

No exemption threshold has been defined

Specific rules for ascertainment and calculation of liability have not been framed
28
PECUILAR SERVICES
BUSINESS SUPPORT SERVICES
Tariff Heading 9805.9200
Overlapping services existing in the definition of BSS. Such services have distinct Tariff
Headings under 1st Schedule but are otherwise non taxable:

Call Centres

Accounting Services

Data Processing and Provision of Information
Rule 4A of Punjab Sales Tax on Services Rules 2012 !
29
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000

Ever since brought into the service tax, franchise services have been bone of
contention among the Provinces and Federation.

Even though franchise services are taxable / excisable under the three prevailing
statutes of the country (with exception of KPK Finance Act 2013) and having similar
definitions of franchise, there are still no clear guidelines for payment of sales tax on
franchise on point of taxation

Intense confusion exist among the taxpayers for payment of sales tax on franchise.
This has already instigated litigation on many issues between the taxpayer and the
revenue.
30
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000
“Franchise” means as an authority given by a franchise under which the franchisee is contractually or otherwise granted
any right to produce, manufacture, sell or trade in or do any other business activity in respect of goods or to provide
services or to undertake any process identified with franchiser against a fee or consideration including royalty or
technical fee, whether or not a trade mark, services mark, trade name, logo, brand name or any such representation or
symbol, as the case may be, is involved.”
Following elements are essential to establish a franchise arrangement under the law:





Franchisee is granted any right to produce or manufacture;
Franchisee is granted any right to sell or trade;
Franchisee is granted any right to do other business activity is respect of goods identified with franchiser;
Franchisee is granted any right to provide services possessed by a franchiser; and
Franchisee is granted right to undertake any process identified with franchiser.
31
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000
Sindh ST Law 2011
Punjab ST Law 2012
 Tax Rate 10%
 Tax Rate 16%
 SRB requires payment of Sindh Sales Tax on gross
franchise / royalty payment of entire country
 PRA requires payment of Punjab Sales Tax on
franchise / royalty attributable to Punjab’s Turnover
 If royalty is paid under an agreement between local
and foreign franchisor, sales tax to be paid on gross
sum remitted or sum laid down in the agreement,
whichever is higher
 SAME
 If no payment is made to franchisor, the assessable
value shall be as per the agreement
 NOT APPLICABLE
 If no franchise agreement in place or remittance not
required, franchise will be deemed to be 10% of the
franchisee’s turnover
 NOT APPLICABLE
32
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000
Sindh ST Law 2011
Punjab ST Law 2012

In case of beverages, if no agreement exists, sales tax is to be
paid @ 10% of value of concentrate.

In case of beverages, if no agreement exists, sales tax is to be
paid @ 16% of value of concentrate.

In the case of food, if no agreement exists, the assessable value
for sales tax shall be 10% of the turnover.

In case of food sector, if no agreement exists, sales tax is to be
paid on net sales of the franchisee (Ambiguous)

If agreement is executed, sales tax is payable as per the agreed
sum.

SAME

Payment of tax on 15th of the relevant month

SAME

If no payment date is prescribed in the agreement or no
agreement exists, tax is payable on 15th day on quarterly basis.

NOT APPLICABLE

Input Tax not admissible to Service Provider

Input Tax admissible to service provider

NOT APPLICABLE

Remitting bank is treated as WHT agent for recovery of sales
tax on franchise
33
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000
Business Issues

Bifurcation of sales tax on franchise among Provinces

FBR’s Claim on Franchise Tax accruing in Sindh & Punjab

Status of recipient of franchise under the Provincial statutes as “deemed registered person”

Adjustment of input tax on franchise service paid on behalf on foreign franchisor – Invoice !!!

Accruals vs. Actual payment – The Feasible Option !
34
PECUILAR SERVICES
FRANCHISE SERVICES
Tariff Heading 9823.0000
Business Issues

Regulatory and exchange restrictions

Agreement between the Franchisor and Franchisee for delay in payments

Exchange rate fluctuations between payment date and payable date

Franchise on the basis of Head Office or Provincial Turnover

Double Taxation Issues
35
PECUILAR SERVICES
SOFTWARE OR IT BASED SYSTEM DEVELOPMENT CONSULTANTS
Tariff Heading 9815.6000

Service taxable from 01 July 2013 onward.

No specific definition of Software or IT Based consultants prescribed so far in Punjab &
Sindh.

Plain and literal reading of service suggests that services provided in relation to ‘system
development’ are subject to sales tax.

However, uncertainty prevails as to whether other services which are associated with the
field of information technology are also taxable.
36
PECUILAR SERVICES
SOFTWARE OR IT BASED SYSTEM DEVELOPMENT CONSULTANTS
Tariff Heading 9815.6000
Examples of such other services could be as follows:








implementation services in relation to licensed softwares;
annual support renewals and software maintenance services;
problem solving and software upgradation services;
services in relation to network administration and information technology infrastructure;
web development and web hosting services;
advisory relating to design, implementation and operational assistance for hardware and software;
implementation services in relation enterprise resource planning application system and
management systems ; and
outsourcing of software or IT based personnel against services charges.
37
PECUILAR SERVICES
SOFTWARE OR IT BASED SYSTEM DEVELOPMENT CONSULTANTS
Tariff Heading 9815.6000

The Punjab Revenue Authority, through its Circular No. 7 of 2013, has opined that every
service provided by Software or IT based consultant is exposed to sales tax under the Punjab
ST Laws 2012.

Rendering of Exempt Services by IT Consultant !

Software has already been declared as ‘goods’ under the Sales Tax Act 1990. Accordingly,
sales tax @ 17% or 18%, as the case may be, is levied on supply of software. FBR’s Ruling !

Practical issues emanate while making demarcation between supply of goods and rendering
of service !

Export of IT Services exempted from Sindh Sales Tax
38
PECUILAR SERVICES
ADVERTISING AGENTS
Tariff Heading 9805.7000
Sindh ST Law 2011
Punjab ST Law 2012
 Advertising agents means a person engaged in  SAME. Advertising consultant also taxable
providing any service connected with making,
preparation, display, demonstration or exhibition of
advertisement in any manner and includes an
advertising agency
 Tax Rate 16%
 SAME
 Advertisement on building, poles, hoarding sites,  SAME
billboards, digital boards, banners, vehicles, cinema,
shops etc. are covered
 Agency commission for advertisement on which sales  SAME
tax on gross value of advertisement has already been
charged and collected would not attract sales tax on
commission. (Source: SRB Clarification)
39
PECUILAR SERVICES
ADVERTISING AGENTS
Tariff Heading 9805.7000
Sindh ST Law 2011
Punjab ST Law 2012
 NOT APPLICABLE
 Supply of goods and materials used in the
preparation of advertisement are inclusive in the
definition of services and accordingly subject to tax
 No discounts are allowed, value constitute gross value
 SAME
40
PECUILAR SERVICES
CONSTRUCTION SERVICES
Tariff Heading 9824.0000

Construction services were brought into the sales tax net by SRB since the month of
November 2011. Initially, these services were subject to sales tax @16%. However, largely the
construction industry did not obtain registration.

Resultantly, to facilitate registration under the Sindh ST Laws 2011, the Sindh Government
offered conditional sales tax rate of 4% on construction services w.e.f 01 July 2013.

PRA also brought construction services into the sales tax w.e.f 01 July 2013. However,
detailed procedure on construction services are yet to be prescribed by PRA.
41
PECUILAR SERVICES
CONSTRUCTION SERVICES
Tariff Heading 9824.0000
Sindh ST Law 2011
Punjab ST Law 2012
 Rate of Sales Tax: 4% or 16%; Service provider may
opt for reduced rate taxation upto 31 December 2013,
subject to fulfillment of certain conditions as provided
under SRB Circular
 Rate of Sales Tax: 16%
 Credit of Input Tax: No input tax available to service
provider if he opts for reduced rate of tax
 Input tax credit available (Rule 5 subjective)
 Value of supply: Gross amount charged for the
services.
 Gross amount charged for the services.
42
PECUILAR SERVICES
CONSTRUCTION SERVICES
Tariff Heading 9824.0000
Sindh ST Law 2011
Punjab ST Law 2012
Exemption:
Exemption:
Projects of commercial and industrial nature where value
of construction does not exceed Rs. 50 million provided
value component of service does not exceed in such a
project not exceed Rs. 10 million.
Projects of commercial and industrial nature where value
of construction does not exceed rupees 50 million.
Construction and development of EPZ, SEZ, diplomatic
and consular buildings and such other buildings and
structures of the organizations as are exempted from
application of Income Tax Ordinance. 2001
Construction of industrial zones, consular buildings and
other organizations exempt from income tax.
43
PECUILAR SERVICES
CONSTRUCTION SERVICES
Tariff Heading 9824.0000
Sindh ST Law 2011
Punjab ST Law 2012
Exemption:
Exemption:
Construction of roads and repair of roads, railways, etc. as are not meant for
commercial purpose or for commercial letting out on rent.
NOT APPLICABLE
NOT APPLICABLE
Government civil works including Cantonment Boards.
Construction of independent projects of private residential houses and
apartments where the covered area does not exceed 10,000 sq feet and 20,000
sq feet in respect in respect of houses & apartment complexes respectively.
SAME
NOT KNOWN
Cases where sales tax is otherwise paid as property developers or promoters
NOT APPLICABLE
Construction work under international tenders against foreign grants-in-aid.
44
PECUILAR SERVICES
CONSTRUCTION SERVICES
Tariff Heading 9823.0000
Business Issues (Sindh ST Laws):

Ascertainment of element of services in a construction contract

Bifurcation of tax rate where part of service under a contract was rendered prior to July 2013

Criteria for exemption threshold [applicable to individual contacts or on total contracts]

Overlapping of construction services with Contractors of building falling under the Tariff Heading
9814.2000; and

Sub contracting of parts of construction contracts taxable under a different Tariff Heading
45
PECUILAR SERVICES
TOLL MANUFACTURING
Tariff Heading 9830.0000

Toll Manufacturing previously covered under Section 2(33) of Sales Tax Act 1990 as ‘other
disposition’. Sales Tax General Order (STGO) 3/2004 also elaborated the taxability of principal and
vendor in toll manufacturing arrangement

Sindh High Court did not agree with FBR’s standpoint and held toll manufacturing as a service

The Federal Government changed the definition of supply under Section 2(33) and removed
‘other disposition’ as part of supply. The corresponding STGO, however, was not withdraw and
still holds the field.

Sindh Revenue Board and Punjab Revenue Authority have also classified “Toll Manufacturing” as
“Service” and accordingly brought to sales tax @ 16% w.e.f 01 July 2013.

SRO 1125 places sales tax on toll manufacturing activity within the 5 export oriented sectors. The
textile industry is required to offer sales tax @2% on toll manufacturing to FBR. Such tax is
adjustable against their output tax liability.
46
PECUILAR SERVICES
CONTRACTORS OF BUILDING, TURNKEY PROJECTS, ETC.
Tariff Heading 9814.2000

Taxable in Sindh

“Contractor of building (including water supply, gas supply and sanitary works), electrical and mechanical
works (including air conditioning) multidisciplinary works (including turn-key projects) and similar other
works”

The definition aims to bring all civil, electrical and mechanical works which are ancillary to the
completion of the construction projects (undertaken by way of a contract) or contracts other than
construction contracts involving mechanical, engineering and similar works into the sales tax net.

“Similar Other Works” Not Defined

Whether contracts of engineering, mechanical and similar works which are part & parcel of
construction contracts are taxable under the Tariff Heading 9814.2000 or 9824.00000 ?
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PECUILAR SERVICES
CONTRACTUAL EXECUTION OF WORK & FURNISHING SUPPLIES
Tariff Heading 9809.0000

Unique Tariff Heading !

Taxable in Sindh since 2011 and in Punjab since July 2013

Classification of services under this Tariff Heading is too cumbersome

SRB has opined that any service, which is not listed in either 1st or 2nd Schedule of Sindh ST Laws, is
taxable under the Tariff Heading 9809.0000, if rendered through a contract.

In the Indian Service Tax Laws, a Similar Entry titled ‘Work Contract’ exists whereby list of services
taxed thereunder have specifically been defined.
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PECUILAR SERVICES
CONTRACTUAL EXECUTION OF WORK & FURNISHING SUPPLIES
Tariff Heading 9809.0000
Sindh ST Law 2011
Punjab ST Law 2012
 Tax Rate 16%
 SAME
 No Rules notified for computation of liability
 SAME
 Applicable to both embedded contracts as well  NOT KNOWN
contracts for services
 In case of embedded contracts and exclusive contracts  APPEARS TO BE SAME
for services, sales tax would be applicable on service
component
 Services specifically listed in the First Schedule are not  No clarification todate; however, similar rule of law
taxable under 9809.0000 (Source: SRB Clarification)
may apply
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PECUILAR SERVICES
CONTRACTUAL EXECUTION OF WORK & FURNISHING SUPPLIES
Tariff Heading 9809.0000
Sindh ST Law 2011

Exclusions:

 Contracts for works OR supplies where total value
does not exceed Rs 50 million in a financial year
subject to condition that the value component of
services in such contract also does not exceed Rs 10
million
 Text books publication & distribution
Punjab ST Law 2012
Exclusion:
 Annual total value of contractual works or supplies
not exceeding Rs 50 million;
 Printing & supplies of books
The annual turnover would be the aggregate value of The aggregate value of total contracts will be examined for
total contracts entered by contractor (Source: SRB exemption criteria
Clarification).
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PECUILAR SERVICES
CONTRACTUAL EXECUTION OF WORK & FURNISHING SUPPLIES
Tariff Heading 9809.0000
Business Issues:

If total contract approach is adopted, it is practically not possible to charge sales tax on
other contracts signed and executed earlier

Withholding Tax issues would also arise for the payer (contractee) as he may not be aware
of the value of other contracts handled contractor

Contracts executable over number of years
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PECUILAR SERVICES
LABOUR & MANPOWER / RECRUITMENT SERVICES
Sindh ST Law 2011
Labour & Manpower Supply Services
Punjab ST Law 2012
Tariff Heading
Manpower recruitment agents
9829.0000
 Tax Rate 16%
Tariff
Heading
9805.6000
 Tax Rate 16%
 In this arrangement, the service provider retains the  In this arrangement, the service provider facilitates his
employee or manpower on its own payroll and gets
client by using its skills & expertise to find suitable
reimbursement for the actual expenses and fee
human resource or manpower
mutually agreed between the parties
 The actual cost of manpower or employee which is  The services are taxable on gross value
reimbursed from the client is not included in the value
of supply and only the consideration or commission is
exposed to sales tax
 Manpower recruiting agents are not taxable under the  Labour & manpower services may not taxable under
Sindh ST Law 2011
the Punjab ST Law 2012
52
SERVICES TAXED
IN KPK
53

Rules, SROs, General Orders, Circulars have not been issued so far which causes a lot of
confusion among the taxpayers and tax advisors

Specific definitions of services brought under the tax net have not been defined

In the absence of SROs / Rules, it appears that sales tax has also been imposed on the following
services which are otherwise exempt (either totality or partially) under Federal & Provincial Tax
Laws:









Services provided by Restaurants
Marriage Lawn
Clubs
Advertisement in newspapers, periodicals
Beauty Parlous
Telecommunications on international Leased Lines or bandwith software exporters registered
under Software exporting Board
Banking and Non-banking Financial Institutions for services with respect to Hajj and Umrah
passengers, cheque book issuance, Musharika and Modaraba financing and Utility Bills collection
Internet Services
Marine, Life & Crop Insurance Services
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THANK YOU
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