The federal government is likely to continue to collect sales tax on services of banking and insurance, construction, franchises and advertisements through Federal Board of Revenue (FBR) on behalf of Sindh government in FY2011-12, official sources told Business Recorder, here on Thursday.
The federal and Sindh governments agreed on 28th September 2010 to empower FBR to collect tax on behalf of the provincial government on major services of banking, insurance, construction, franchises and advertisements till 30th June 2011. As far as collection is concerned Sindh's share was 50 percent as per agreement between the Centre and Sindh.
Sources claimed that negotiations between the Centre and Sindh are underway in this regard but it is most likely that the agreement would be extended and FBR would be authorised for FY2011-12 to collect sales tax on above-mentioned services.
This move was initiated by the Sindh government because Sindh Revenue Board (SRB) cannot collect sales taxes on above mentioned services due to lack of resources and other facilities, sources said. After the extension of the agreement between the Centre and Sindh, the SRB would only to collect sales tax on services of telecommunication services, services provided or rendered by hotels, restaurants, marriage halls, lawns clubs and caterers, courier services, services provided or rendered by persons engaged in contractual execution work or furnishing supplies and services provided by terminal operators except terminal fee charges in FY2011-12, sources said.
While, services provided or rendered by persons authorised to transact business on behalf of others, services provided and rendered by property developers and promoters, beauty parlours/salons, slimming centres, laundries/dry cleaners, architects, town planners, contractors, interior designers, professionals and consultants, pathological laboratories, medical diagnostic laboratories including x-rays, CT-scan, M.R, imaging etc, specialised agencies would also come into services tax net of SRB in future, sources claimed.
According to the Sindh sales tax on services act, 2011, SRB has been empowered to collect services tax on above mentioned services but management of SRB has decided to collect sales tax on services only on specified services initially, sources added.
In this connection, Chairman Sindh Revenue Board Nazar Hussain Mahar told Business Recorder that there are chances that the agreement between the Centre and Sindh regarding collection of sales tax on services on banking and insurance, construction, franchises and advertisements would be extended for FY2011-12.
Member SRB for Co-ordination and Legal Mumtaz Ahmed Shaikh told Business Recorder that negotiations between Sindh and federal government are in progress and another meeting is also expected to be held next week in Islamabad in this regard. Sindh Minister for Finance, Syed Murad Ali Shah could not be reached for his comments.
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