Payments, Adjustments & Refunds
Adnan Mufti, FCA
Partner, Shekha & Mufti – Chartered Accountants
An independent member firm of
Moore Stephens International Ltd.
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Definition of Service(s)
“Service” or “Services” has an
inclusive definition that includes the
activities defined in First Schedule
& Chapter 98 of the Pakistan
Customs Tariff
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First Schedule

Services provided or rendered by hotels, restaurants, marriage halls, lawns, clubs and caterers.

Advertisement.

Services provided or rendered by persons authorized to transact business on behalf of others.

Services provided or rendered by property developers
and promoters.

Courier services

Services provided or rendered in matters of hire.

Services provided or rendered by persons engaged in contractual execution of work or furnishing
supplies.

Services provided or rendered for personal care by beauty parlors/clinics, slimming clinics and
others.

Services provided or rendered by laundries, dry cleaners.

Telecommunication services.
(continued)
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First Schedule (continued)

Services provided or rendered by laundries, dry cleaners.

Telecommunication services.

Services provided or rendered by banking companies, insurance companies, cooperative financing
societies, modarabas, musharikas, leasing companies, foreign exchange dealers, non-banking
financial institutions and other persons dealing in any such services.

Services provided or rendered by architects, town planners, contractors, property developers or
promoters, interior decorators.

Services provided or rendered by professionals and consultants etc.

Services provided or rendered by pathological laboratories.

Services provided or rendered by medical diagnostic laboratories including X-Rays, CT Scan, M.R.
Imaging etc.

Services provided or rendered by specialized agencies.

Services provided or rendered by specified persons or businesses.
(continued)
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First Schedule (continued)

Services provided or rendered by specialized workshops or undertakings.

Services provided or rendered in specified fields.

Services provided or rendered for specified purposes.

Franchise services.

Construction services.

Consultancy services.

Management services including fund and asset management services.

Market Research agencies.

Program producers.

Brokerage and indenting services.

Race Clubs.

General Insurance Agents.

Exhibition or convention services.

Data Processing and Provision of information, services of Engineers, handling and storage of goods.

Fashion designers.

Cable Operators.
(continued)
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First Schedule (continued)

Exhibition or convention services.

Data Processing and Provision of information, services of Engineers, handling and storage of goods.

Fashion designers.

Cable Operators.

Internet Café.

Pandal and Shamiana service.

Airport services.

Intellectual Property services.

Forward Contract services.

Packaging services.

Services provided or rendered in matters of hire.

Purchase or sale of moveable or immovable goods or property .

Property dealers.

Car/automobile dealers.

Dealers of second hand goods other than automobiles.

Cosmetic and Plastic Surgery.
(continued)
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First Schedule (continued)

Beauty Parlor/ Beauty Clinics.

HR Consultants.

Corporate Law Consultants.

Tax Consultants.

Human Resources & Personal Development Services.

Coaching Centers.

Vocational Centers.

Actuarial Services.

Training Services.

Tracking Services.

Quality Control Services (ISO certification Board).

Services provided by Motels/guest houses & Farm houses.

Debt collection Agencies.

Amusement Parks.

Call Centers.

Film and Drama studios.
(continued)
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Second Schedule (Taxable Services)
Service
 Telecommunication services.
Rate
19.5%
 Services provided or rendered
16%
by hotels, restaurants, marriage
halls, lawns, clubs and caterers.
 Advertisement .
16%
(continued)
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Second Schedule (Taxable Services)
Service
Rate
 Services provided or rendered by
16%
property developers or promoters
 Courier services
16%
 Services provided or rendered by
16%
persons engaged in contractual
execution of work or furnishing
supplies.
(continued)
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Second Schedule (Taxable Services)
Service
Rate
 Services provided or rendered by
16%
banking companies, insurance companies etc
 Services provided or rendered by specified
16%
persons or businesses such as Money Changers,
Stock Brokers.
 Franchise services
16%
(continued)
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Second Schedule (Taxable Services)
Service
Rate
 Construction services
16%
 Services provided by terminal
16%
operators except terminal fee charges.
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Scope of sales tax
 This Act was assented on 10th June 2011. The law deals with levy tax on
services provided, rendered, initiated, received or consumed in the Province
of Sindh
 The Sind Sales Tax on Services Act 2011 (the Act) is applicable to services
listed in the Second Schedule to the Act. The services listed in the Second
Schedule are taxable services
 Tax is chargeable, leviable and collectable at the rate specified in the
Second Schedule. The general rate is 16 % except telecom services which
are subject to 19.5 %
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Taxability of Service
 Service listed in the Second Schedule;
 Provided by a registered person from registered office or
place of business in Sindh;
 Provided in the course of an economic activity, including in
the commencement or termination of economic activity.
 Service provided by unregistered person (Reverse charge):


if provided to resident person;
by non resident person in the course of economic
activity
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Determination of tax liability
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A registered person, while determining tax liability,
shall be entitled to claim input tax credits for the
tax paid on account of taxable purchase and
utilities consumed proportionately for furtherance
of taxable activity against output tax liability subject
to any conditions or limitation as prescribed by the
Board.
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Credit or debit of tax paid
If a registered person had issued a tax invoice in respect of taxable service
provided or rendered by him and the amount shown in tax invoice need to be
modified, the service provider will issue debit or credit notes with details to be
mentioned in such debit or credit notes (i.e., value of supplies, sales tax,
Registration Number / NTN of services provider and service recipient etc.) and
adjust the amount of tax accordingly.
The above adjustment can only be made if the related debit or credit note is issued
within 90 days of issuance of invoice, however extension of further 30 days can be
availed subject to approval from sales tax officer.
In case of services rendered to unregistered person, the adjustment can only be
made against credit note issued by the service provider.
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Input Tax Adjustment
 Only persons registered with SRB could claim input tax
adjustment under the law in respect of the sales tax paid
on goods and services used in providing taxable
services.
 A tax invoice carrying buyer’s Name or NTN or STRN is
necessary for adjustment purposes. For Utilities, the bill
should be in the name of the buyer (claimant).
 Input tax has to be bifurcated between the services taxed
in Sindh and taxed outside Sindh.
(continued)
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Input Tax Adjustment
To claim unadjusted input tax, a maximum period of 4
months has been prescribed after the end of relevant
tax period.
This means in order to claim input tax the registered person
would need to settle his supplier within 4 months’ time
notwithstanding the actual credit period allowed to him from
the supplier.
Adjustment of input tax is subject to audit / reconciliation by
the SRB.
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Apportionment of Input Tax
While the Rules allows for apportionment of input tax, it debars input tax paid on services
rendered outside Sindh. Further, input tax adjustments have been allowed, subject to
reconciliation and audit by SRB.
The apportionment of input tax shall be made according to following formula:
Residual input tax
on taxable services
=
Value of taxable services
(value of taxable + value of non
taxable/exempt services)
X admissible input tax
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Adjustment of input tax [Rule 22]
Input tax cannot be claimed unless:
 paid by registered person;
 tax is actually used or consumed in any taxable services provided or rendered by
registered person.
The concept of ‘accrual’ as envisaged in Sales Tax Act, 1990 has been changed with
payment.
Input tax in relation to the taxable services shall be worked out first and the amount, so
worked out, shall be bifurcated between services provided and taxed in Sindh and for
those provided outside Sindh and also not taxed in Sindh.
We consider that such measure would yield comparatively higher revenue to the
Province of Sindh in all cases where taxable services are rendered both in Sindh as well
as rest of the country.
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Input Tax Credit Not Allowed
Input tax cannot be claimed in respect of following:
 Capital goods / fixed assets not exclusively used in providing or
rendering of services;
 Goods and services purchased or acquired before the tax period
of July 2011.
 Utilities bills which are not in the name of registered person,
unless evidence of consumption is produced;
 Sales tax claimed as input tax on services where such sales tax
amount has not been deposited by the supplier / service provider
or where the evidence of such payment is not produced. This
requires the taxpayer to conduct the business with respectable
and trustworthy suppliers/vendors who can cooperate at the time
of tax audits.
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Input tax Credit Not Allowed
 Goods and services received against false, fake, forged or flying
invoices or against purchases from the persons black listed or
suspended by SRB or by the Federal Board of Revenue or by any
other Provincial Authority.
 Such goods or services as are notified by the SRB to be
inadmissible for input tax adjustment.
 Carry forward of the input tax adjustment relating to the tax period
June 2011 or earlier.
 Goods and services used or consumed in a service liable to a
reduced tax rate or a specific rate not based on value.
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Determination of tax liability
Computation of sales tax liability
Illustration
-----------Rupees----------Value
Domestic purchases (excluding fixed assets
for Providing/Rendering of Services)
Imports excluding fixed assets
160
1,000
160
500
80
Sales tax credits
1,000
Non creditable inputs( relating to exempt, non
taxable supplies/rendering of services and
relating to services provided in other
jurisdiction and taxed there)
Total input tax for the month (A)
1,875
300
Sales tax debits
Capital fixed assets
Sales Tax
Service provided or rendered
5,000
800
Services exported
Output tax for the month (B)
Sales tax payable (B-A)
(625)
5,000
(100)
800
500
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COLLECTION / PAYMENT OF TAX
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 Sales tax for providing a taxable service in a tax
period is payable by a person at the time of filing the
return on 15th of every following month. The tax
return needs to be filed on 18th of the month.
 The SRB has retained powers to make rules and
specify to charge, collect and pay sales tax on
services in any other way, mode, manner or time as
and when notified.
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 The Sindh Revenue Board (SRB) has the powers




to exempt:
any taxable service;
any taxable service provided by a specific person or
a class of persons;
any recipient of services or class of such recipients,
including international organizations and institutions;
any person or class of persons from the whole or
any part of the tax chargeable under the law either
prospectively or retrospectively.
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Refunds
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No provision / rule exists in the Act or
Rules governing refund mechanism.
However, Row 16 & 18 of Sales Tax Return (SST-03)
deals with [subjective and restricted] refunds.
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