Sales tax on health, education sectors likely

2 to 3% tax may also be imposed on users of entertainment services

KARACHI:

After checking the fees of laboratories, welfare hospitals and big schools, the Sindh Revenue Board (SRB) has recommended including them in the sales tax. It has also been suggested to apply a two to three per cent sales tax on people who use Netflix, Amazon, and other entertainment services. This was said by Wasif Ali Memon, the head of the Sindh Revenue Board, in a special conversation with The Express Tribune.

The sales tax has not yet been imposed on health and education sectors, however, based on the reality, the Sindh Revenue Board (SRB) will get the bill approved by the new assembly to bring these sectors into the sales tax net.

He stated that following the Supreme Court ruling, the collection of sales tax has already been imposed on cosmetic dentistry. Dentists, insurers, and retailers were included in the Sindh sales tax net. Even though there are few defaulters in each SRB sector, there aren't any large-scale defaulters.

He said that in the past, certain eateries had been perpetual SRB defaulters and had likewise been sealed. The restaurant industry was later informed about the Sindh sales tax and was persuaded to pay it, as a result the SRB started collecting Rs100 million sales tax monthly. This has led to a rise in the amount of monthly income receipts from the restaurant, wedding halls, and catering industries to Rs1 billion rupees. The only way to increase awareness about the sales tax is to advertise.

According to SRB chairman, tax ethics are equally vital to tax collection since it boosts public trust and makes people more inclined to pay taxes. He said, although the services industry contributes 60 per cent of the nation's GDP, it only generates 10 per cent of total income.

Wasif said, following the court ruling, the objector must pay the penalty with the real and withdrawal tax. He said the actual stakeholders from the SRB's perspective are the business sectors. Chairman SRB said that 60,000 people are registered with SRB, which is growing. SRB receives 75 per cent of its income from Karachi and 25 per cent from other parts of Sindh. He claimed that the SRB had expanded the reach of sales tax collection to include private banks. Franchisees now pay Sindh sales tax through private banks when they provide services in rural regions.

He said, a revenue target of Rs235 billion has been set for the current fiscal year, while the Sindh Revenue Board collected Rs186 billion in sales tax in the previous fiscal year.

According to him, the revenue increase in July 2023 over July 2022 was 66 per cent, indicating that the revenue goal for the current fiscal year would also be met.

In answer to a query, the SRB chairman stated that the board is the most important organisation to generate revenue in Sindh. SRB derives major revenue from ports, telecommunication, insurance, business support system, courier companies, franchises, construction, contracts and transport sectors. Regarding the possibility of collecting all provincial taxes through one window, he stated that local governments, the excise department, and the board of revenue are responsible for collecting excise, property, and other taxes, including agricultural. They also have more resources, expertise, and personnel in their respective domains, but SRB is still able to keep an eye on all provincial taxes. He said that the government is attempting to collect provincial taxes through a single portal.

In response to a query, he stated that the SRB interacts with taxpayers via IT and conducts audits using an automated method. He said that Sindh sales tax is also indirectly collected from government's development projects.

 

Published in The Express Tribune, August 16^th, 2023.