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PESHAWAR: The provincial government of Khyber Pakhtunkhwa has notified drastic cut in rates of sales tax on dozens of services to provide relief to businesses and promote tax culture in the province.

The government has notified amendments in the second schedule for reducing rates of sales tax on 29 services as approved in the budget 2020-21, said a press release issued by Khyber Pakhtunkhwa Revenue Authority (KPRA) here Friday.

Under the relief package, the rates of sales tax have been reduced from 15 percent to two percent on 10 different services. Similarly, five services have been brought down from 15 percent slab to five percent, while, six services have been brought down from 15 percent rates to 10 percent and eight percent.

The category of the beneficiaries include construction and allied services, hotels and restaurants, workshops, business support services, laboratory services, labour or manpower providing services and beauty parlors.

According to the notification, the construction services sector that was earlier taxed at the rate of 15 percent has now been brought down to 2 percent. The sales tax on services provided by hotels, restaurants, guest houses and lodges having local chains have been reduced from 15 percent to eight percent while, as an incentive the hotels and restaurants having Restaurant Invoice Management System (RIMS) that works properly, the rate of sales tax on services will be merely five percent.

"The aim of the tax package is to be provide relief to the public and ease business in the province with encouraging tax compliance which would help in building tax culture," said Fayyaz Ali Shah, the Director General KPRA.

"Tax compliance would ensure financial resources with the government to be spent on socio-economic uplift of the people," he said.

According to the notification, the sales tax rates on manpower or labour supplying services, business support services, laboratory and testing services and contractual execution service providers that was 15 percent will now be taxed at five percent rates.

Similarly, airports, dry ports, container terminal providers and storage or warehouses service provider that were taxed at 15 percent will now pay 10 percent.

The rate of sales tax for workshops operating as standalone business have been dropped down from five percent to two percent while, the rates for industrial workshops have been reduced from 10 percent to five percent.

The sales tax on beauty parlors services which was eight percent is five percent now and for the medium-size laundry services the sales tax rates have been reduced from 8 percent to 2 percent only.

For the 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 the tax rates have been reduced from 15 percent to 2 percent.

For the services provided by property dealers, bargain centers, car wash, Digital or IT firms, call centers and firms or individuals providing cinematographic services the sales tax rate have been brought down from 5 percent to 2 percent.

Copyright Business Recorder, 2020