K-P slashes sales tax on construction sector

To provide relief to businesses and encourage tax compliance in the wake of the novel coronavirus (Covid-19) pandemic, the provincial government on Friday notified a decrease of up to 13% in the rates of sales tax charged on over a dozen services in the province.

In a notification issued by the Khyber-Pakhtunkhwa (K-P) Revenue Authority (KPRA) on Friday, changes in the second schedule for reducing rates of sales tax on 29 services was approved in the budget for the fiscal year 2020-21.

Services for which the taxes were reduced include construction and allied services, hotels and restaurants services, workshops, business support services, laboratory services, labour or manpower providing services and beauty parlours.

“The aim of the tax package is to provide relief to the public and create ease of business in the province while encouraging tax compliance, which will help in building a tax culture,” KPRA Director General Fayyaz Ali Shah said, adding that tax compliance will ensure financial resources of the government are spent on the socio-economic uplift of the people.

Sales tax rates on 10 different services were reduced from 15% to just two per cent in the tax relief package given by the provincial government.

These services include the construction services sector, capital goods dealership services, equipment renting services, cargo services by railways, services of underwriters, indenting services, auctioneering services, erection and commissioning services and quality assurance services.

Similarly, the tax on five services was reduced from 15% to 5%. This includes manpower or labour supplying services, business support services, laboratory and testing services and contractual execution service providers.

Sales tax on six services including airports, dry ports, container terminal providers and storage or warehouse service providers was reduced from 15% to 10%.

Similarly, the sales tax on services provided by hotels, restaurants, guest houses and lodges having local chains were reduced from 15% to just eight per cent. As an incentive, those hotels and restaurants who have installed the Restaurant Invoice Management System (RIMS) and are working properly, the rate of sales tax on their services have been further reduced to just five per cent.

The tax rate for workshops operating as a standalone business was reduced from five per cent to two per cent, while the rates for industrial workshops, the rates were reduced from 10% to five per cent.

The sales tax on beauty parlour services was reduced from eight per cent to five per cent. The rates for medium-sized laundry services dropped from eight per cent to two per cent.

Tax rates were brought down from five per cent to just two per cent for services provided by property dealers, bargain centres, car wash, digital or information technology (IT) firms, call centres and firms, or individuals providing cinematographic services.

Published in The Express Tribune, September 5^th, 2020.