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ISLAMABAD: The government has taken a significant documentation measure by allowing credit/debt card payments at a reduced sales tax rate of five per cent in restaurants/eateries.

Under the Finance Act, 2023, a lower rate of five per cent sales tax would be charged on dining out and credit or debit card payments. Among other documentation measures, the said decision would also be instrumental in discouraging cash payments and cash transactions at restaurants. Now, the restaurants would not be able to retain the digitally paid sales tax by the consumers.

Official sources told Business Recorder that the decision of the FBR has been implemented from July 1, 2023 which would encourage digital payments and encourage consumers to conduct documented transactions. The restaurants would be bound to collect the reduced rate of sales tax of five per cent in cases where the customers prefer to make payments through credit or debit cards.

On digital payments: services tax on restaurants in ICT reduced in federal budget

The move would also encourage voluntary compliance of the general masses to use the debt and credit cards payments at a lower rate of five per cent. However, the FBR would also ensure to enforce the said documented measure through its field formations.

The reduced rate of five per cent tax included services provided by restaurants including cafes, food (including ice cream) parlours, coffee houses, coffee shops, deras, food huts, eateries, resorts, and similar cooked, prepared or ready-to-eat food service outlets, etc.

The tax rate has been set at five per cent where payment against services is received through debit or credit cards, mobile wallets, or QR scanning subject to the condition that no input tax adjustment or refund shall be admissible.

On the other hand, 15 per cent sales tax would be applicable where payment is received in cash at the restaurants.

Copyright Business Recorder, 2023


Comments are closed.

Shahid Anwar Jul 10, 2023 10:15am
Is this applicable only to Islamabad or all over the country?
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Realist Jul 10, 2023 10:19am
Considering the numbering of restaurants that fall in FBR's domain for the purposes of sales tax i.e. in Islamabad (sales tax on services is a provincial subject), the decision can hardly be called 'instrumental ' or significant.
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Mohammad Anwar Jul 10, 2023 11:23am
Is FBR team is so competent to collect paid sales tax from restaurants on regular basis ? Can FBR make public the amount it collected from restaurants and point of sales ?
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Mohammad Anwar Jul 10, 2023 11:27am
Every day FBR announces tax rules. Why it's in tits and beats ?
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Tulukan Mairandi Jul 10, 2023 01:12pm
No good for the poor who lack credit cards
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Humaira Nadeem Jul 10, 2023 02:04pm
Is this applicable all over Pakistan?
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Muhammad Ayub Jul 10, 2023 02:17pm
To the benefit of readers, Please also make it clear that this only applies in Islamabad, since changes were made in Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
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Muhammad Ayub Jul 10, 2023 02:19pm
This only applies to ICT, since the changes were made in Islamabad Capital Territory (Tax on Services) Ordinance, 2001.
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Fazeel Siddiqui (Overseas Pakistani) Jul 10, 2023 02:25pm
Correct me I'm wrong. If a 10 person meal price Rs: 5,169.50 with VAT regime input Sales Tax 930 .50 and profit margin 1,220 Total 7,320 will be charged 5% higher at 7,686 since there will be input tax claim allowed to that restaurant to adjust back price. Instead of decrease will this increase inflation burden on people who want to dine out or order delivery?
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Shahzad Jul 10, 2023 04:15pm
Why Macdonald s Pakistan and KFC charging 16% tax ?? Can Macdonald and KFC please reply to this ?
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Owais Jul 10, 2023 07:35pm
Very good step by govt highly appreciated.
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Asghar Jul 10, 2023 11:26pm
That seems to be a good move, but unfortunately no restaurent in Islamabad is offering such options from the beginning of the financial year. Restaurents shall be advised clearly to offer such options. Moreover to reduce the cash transactions further, medical stores shall also be given similar options to offer 5% less tax enabling people to benefit a little more.
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Waqar Jul 11, 2023 12:57am
McDonald has not reduced tax rate on card payments.
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Voice of Pak Jul 12, 2023 05:14am
This is all on papers so far with zero implication, check and balance. Even to date fbr fail to correct the formulas in iris and this type of digital implementation will break their leg.
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Usman Jul 12, 2023 11:03am
@Shahzad , stop eating from them
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