Punjab Finance Bill aims at rationalising ST on services structure

LAHORE: With a view to rationalise the structure of sales tax on services in Punjab and to deal with the matters ancillary thereto and connected therewith the Punjab Finance Act 2025 has been laid in the Punjab Assembly under which the concept of taxing of services based on negative list has been introduced.

As per the finance Bill, the concept of taxing of services based on negative list is not new, as the system already exists in many countries and implementation of this would give substantial increase in the revenues to the provincial government by broadening the tax base. Under the Finance Bill, the amount of penalty has been increased for compliance purposes especially in respect of Electronic Invoice Monitoring System.

As per the bill, section 3A has been inserted to provide that “all services are taxable under this Act, including but not limited to the services.”

Under the bill, notwithstanding anything contained in this Act and subject to any condition and to the extent specified therein; all services mentioned in the First Schedule shall be tax-free services under this Act.

Section 16B has been inserted for defining tax free services including rendering and consumption of goods or services; amount of sales tax paid on; telecommunication services in excess of nineteen and a half percent ad valorem; carriage of goods by rail or road in excess of fifteen percent ad valorem; and other services in excess of sixteen percent ad valorem.

Under the bill, where any person refuses to accept payments through digital means i.e. (debit/credit cards, mobile wallets or QR scanning, such person shall be liable to pay a penalty of up to one million rupees: provided that the penalty shall not be less than four hundred thousand rupees on first and three hundred thousand rupees on each subsequent default: provided further that in case of three acts of commission or omission, the business premises of such person may further be liable to be sealed for a period which may extend to one month.

As per Second Schedule, Taxable Services, there will be 15% rate of tax with input tax adjustment for service provider and service recipient against services provided by persons for carriage of goods by rail or road. There will be 19 and half percent of tax for telecommunication services:

(a) telephone services;

(b) fixed line voice telephone service;

(c) wireless telephone;

(d) cellular telephone;

(e) wireless local loop telephone;

(f) video telephone;

(g) payphone cards;

(h) pre-paid calling cards;

(i) voice mail service;

(j) messaging service;

(k) short message service (SMS);

(l) multimedia message service (MMS);

(m) bandwidth services used for voice and video telecommunication services:

(i) copper line based;

(ii) fiber-optic based;

(iii) co-axial cable based;

(iv) microwave based;

(v) satellite based;

(n) telegraph;

(o) telex;

(p) telefax;

(q) store and forward fax services;

(r) audio-text services;

(s) tele-text services;

(t) trunk radio services;

(u) paging services;

(v) voice paging services;

(w) radio paging services;

(x) vehicle and other tracking services; and

(y) burglar and security alarm services;

(i) internet services, whether dialup or broadband, including email services, data communication network services (DCNS) and value added data services;

(ii) such charges payable on the international leased lines or bandwidth services used by:

(a) software exporting firms registered with Pakistan Software Export Board; and

(b) data and internet service providers licensed by the Pakistan Telecommunication Authority; and

(iii) such charges payable on the international leased lines used by the software exporting firms registered with Pakistan Software Export Board for software exports.

Copyright Business Recorder, 2025