Sales tax on services cut to 8pc: Complete removal of five levies proposed

KARACHI: The Sindh government has planned important changes in the tax system to make it simpler and to reduce the financial burden on both individuals and businesses. As per budget proposal, the Sindh government has decided to reduce Sindh sales tax on services by 2 percent to 8 percent and proposed completely removal of five levies for the next fiscal year (FY26).

The Chief Minister Sindh, Syed Murad Ali Shah, on Friday, in his budget speech for FY26 said that some important changes being planned to make Sindh’s tax system simpler and to reduce the financial burden on both individuals and businesses.

Sindh CM Murad presents Rs3.45trn provincial budget for FY2025-26

For the sales tax on services, the existing Positive List system for Sindh sales tax shall be transformed to a system based on Negative List implying that all services shall be taxable except the ones specified in the Negative List. Chief Minister believed that this will expand the sales tax base and will also reduce possible tariff disputes and litigations.

Under the existing law, all major services are taxable and a smaller segment of services is not taxable. This situation creates disputes regarding taxability of services, which leads to unnecessary litigation and also problems for taxpayers. Therefore, the decision is being made to transform to negative list regime by taxing all services but at the same time taking care that essential and social services are kept exempt and that a significant part of new services is subjected to a reduced rate.

Further, to protect small businesses, those with annual turnover below Rs 4 million will remain exempt from payment of sales tax.

Copyright Business Recorder, 2025