Note on SRB's Notifications dated June 27 & July 1, 2019

Sindh Sales Tax - Notifications issued by the Sindh Revenue Board (SRB)
REDUCTION IN TAX RATES
SRB has prescribed reduced rates of Sindh Sales Tax (SST) for certain services, subject to conditions and restrictions prescribed, inter alia including restriction for input adjustment. SRB has notified further reduction in tax rates for some services, in addition to providing reduced rate of SST for some new services. The changes are summarised as under:

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Tariff         Description of services                Rate of Tax

Heading No.                                          Old      New

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9805.5000      Travel agents                           8%      5%

9805.5100      Tour operators                          8%      5%

9811.0000      Service provided or rendered by        13%      5%

               stand-alone laundries and dry

               cleaners.

9813.1500      Life insurance (other than group        8%      3%

               life insurance)

9830.0000      Services provided in the matter        13%      3%

               of manufacturing or processing

               of textile and leather goods for

               others on toll basis

9834.0000      Services provided or rendered by       10%      5%

               fashion designers

9836.0000      Services provided or rendered by        8%      3% (with no withholding tax), excluding road

               persons engaged in inter-city                   transportation or carriage of:-

               transportation or carriage of                   (i) petroleum oils through oil tankers (for which

               goods by road through truck                     option for taxability at 15% has been extended till

               addas or through bus/wagon                      June 30, 2020);

               stands                                          (ii) automotive vehicles, classified under tariff

                                                               headings of Chapter 87 of the First Schedule to the

                                                               Customs Act, 1969, as are transported or carried

                                                               through specialized vehicle carriers; and

                                                               (iii) goods and cargo through vehicles operated by Fleet

                                                               Logistic Companies having not less than 25 vehicles

                                                               in its fleet

                                                               Note:

                                                               Services mentioned at (ii) and (iii) above are

                                                               taxable at reduced rate of 8% unless the service

                                                               provider opts for taxation at standard rate of 13%.

9815.3000      Services provided by accountants        8%      13% (accounting and auditing services remain chargeable

               and auditors other than                         to SST at the rate of 8% with no input tax adjustment).

               accounting and auditing services

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The above amendments have been made through Notification No. SRB 3-4/11/2019 dated June 27, 2019 by amending the Notification No. SRB 3-4/8/2013 dated July 1, 2013
NEW SERVICES MADE SUBJECT TO SST AT REDUCED RATE
Effective July 1, 2019, following new services have been made subject to SST. However, these have been subjected to SST at reduced rates with the condition that no input tax adjustment will be allowed:

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Tariff        Description of services                                                                     Rate of

Heading No.                                                                                                   SST

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9806.6000     Renting of machinery, equipment, appliances and other tangible goods                             5%

9821.2000     Indoor sports and games center                                                                  10%

9846.0000     Services provided or rendered by cab aggregator and the services provided or

              rendered by the owners or drivers of the motor vehicles using the cab aggregator services        5%

9848.0000     Training services                                                                                5%

9853.0000     Vehicle parking and valet services                                                               5%

9855.0000     Insurance Agents*                                                                                5%

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The above amendments have been made through Notification No. SRB 3-4/21/2019 dated July 1, 2019 by amending the Notification No. SRB 3-4/8/2013 dated July 1, 2013.
-- SRB has issued Special Procedure Rules vide Notification No. SRB 3-4/22/2019 dated July 1, 2019 for collecting SST on services provided by insurance agents or insurance brokers. SRB vide Notification No. SRB 3-4/24/2019 has also made SRB registered persons or insurers 'withholding agents' to collect SST on the services of insurance agents or insurance brokers.
WITHDRAWAL OF EXEMPTION
Exemptions provided to following services have been withdrawn as under:

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Tariff

Heading No.     Description of services

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98.12           Internet services, whether dialup up or broadband, including email services and

                data communication network services of upto 2 mbps speed valued at not more than

                1,500 rupees per month service recipient and of more than 2 mbps speed but not more

                than 4 mbps speed valued at more than 2,500 rupees per month per service recipient.

                These services are now chargeable to SST@ 19.5%.

98.13           Services provided by banking companies and non-banking financial companies in respect

                of Hajj and Umrah, Cheque Book issuance and Musharika and Modaraba financing.

                These services are now chargeable to SST@ 13%.

9802.4000       Following advertisement in newspaper and periodicals are now taxable at 3% which were

                previously exempt from SST:

                (i) in colour (i.e. other than the advertisement wholly in black & white), irrespective of

                the size;

                (ii) in colour or black & white occupying one-quarter (or equivalent of one-quarter of a

                page, generally known as 27 centimeters in height x 4 columns or 15 centimeters in

                height x 8 columns) or more of a page of a newspaper; and

                (iii)in colour or black & white occupying half a page or more of a page of a periodical

                In line with withdrawal of exemption for the above advertisement services, withholding

                rules have also been made applicable thereon.

9824.0000       Construction services relating to construction and repair of roads, ports, airports,

                railways, transport terminals and bridges and also of Government (including Local

                Government and Cantonment Board) buildings as are not meant for commercial purposes

                or for commercial letting out on rent.

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The above amendments have been made through Notification No. SRB 3-4/12/2019 dated June 27, 2019 by amending the Notification No. SRB 3-4/7/2013 dated June 18, 2013.
REDUCTION IN THRESHOLD FOR EXEMPT SERVICES
Exemption from SST is available to following services provided annual turnover does not exceed Rs. 4 million and total utility bills does not exceed Rs. 40,000. These thresholds have now been reduced to Rs. 2.5 million and Rs. 25,000 respectively:

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Tariff Heading No.  Description of services

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9810.0000           Services provided or rendered for personal care by parlours,

                    beauty clinics, slimming clinics or centers and others

9811.0000           Services provided or rendered by laundries and dry cleaners

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EXEMPTION FOR SERVICES UTILISED IN THE PROJECTS FINANCED BY FEDERAL OR PROVINCIAL GOVERNMENT

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S.No.   Category                  Notification

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1       Sindh Annual              (i) Presently, exemption to the extent of sales tax rate in excess of 2%

        Development Program       was available in respect of specified services utilised in new

        (ADP)                     development schemes and projects which were included in the

                                  Sindh ADP of the year 2017-2018. Through Notification SRB 3-

                                  4/13/2019 dated June 27, 2019, the exemption has now been

                                  extended to new schemes of 2018-19 and also covering

                                  those which are 'on-going' development schemes and projects of

                                  2019-20 and thereafter.

                                  (ii) Certain specified services utilised in new development schemes

                                  and projects of the financial year 2019-20 or thereafter shall be

                                  eligible for exemption from SST which is in excess of 5%.

                                  (iii) Recipients of services stated in (i) and (ii) above have also been

                                  made withholding agents to withhold SST at the rates stated

                                  above.

                                  [Notification No. SRB 3-4/13/2019 dated June 27, 2019 amending the

                                  Notification No. SRB 3-4/9/2017 dated June 2, 2017; read with

                                  Notification No. SRB 3-4/24/2019 dated July 1, 2019]

2       Federal PSDP              Certain services utilized in new development schemes and projects

                                  including on-going projects located in Province of Sindh and funded

                                  partially or fully through Federal PSDP of the Government of Pakistan

                                  of the financial year 2019-20 or thereafter shall be eligible for

                                  exemption from SST in excess of 5%.

                                  Recipients of above-referred services have also been made withholding

                                  agents to withhold SST at the rate stated above.

                                  [Notification No. SRB 3-4/14/2019 dated June 27, 2019 amending the

                                  Notification No. SRB 3-4/3/2018 dated February 6, 2018 and

                                  Notification No. SRB 3-4/24/2019 dated July 1, 2019]

3       Construction services -   Construction services in relation to Government Civil Works (for which

        Federal, Provincial or    the expenditure is paid out of the expenditure budget of the Federal

        Local Government          Government or the Provincial Government or the Local Government or

        budgets                   the Cantonment Board) are now taxable at 5%.

                                  Recipients of above-referred services have also been made withholding

                                  agents to withhold SST at the rate stated above.

                                  [Notification No. SRB 3-4/11/2019 dated June 27, 2019 amending

                                  the Notification No. SRB 3-4/8/2013 dated July 1, 2013 and

                                  Notification No. SRB 3-4/24/2019 dated July 1, 2019]]

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SINDH SALES TAX SPECIAL PROCEDURE RULES FOR SERVICES PROVIDED BY CAB AGGREGATORS
The services provided by Cab Aggregators have been brought into the ambit of SST with effect from July 1, 2019 under the tariff heading 9846.0000. The term cab aggregator is principally defined to mean an intermediary who connects the passenger with the cab service provider through electronic or digital means. The services provided by the owners or drivers of the motor vehicles using the cab aggregator services have also been subjected to SST under the tariff heading 9846.0000. Through notification No. SRB-3-4/21/2019 dated July 1, 2019, reduced rate of 5 per cent is prescribed for such services, without adjustment of input tax.
Special procedure rules for charge ability and collection of SST on such services have been notified through the Notification No. SRB3-4/23/2019 dated July 1, 2019. It has been re-affirmed that the value of taxable services will include value of services provided by the cab aggregator as well as that provided by the associated owner or driver of the vehicle. It has also been clarified that SST will be levied on the gross value of consideration, before allowing any discounts to the passengers.
The associated drivers or owners of the vehicles are relieved from liability to register and in turn, from the liability to charge, collect and pay SST on trip charges earned by them from the passengers. On the other hand, the liability to charge, collect and pay SST on the entire amount billed to passengers has been imposed on the cab aggregator. For that purpose, withholding Rules have also been amended to include cab aggregator or the branch office/representative of non-resident cab aggregator as withholding agent, in relation to the services provided by the owners or drivers of the motor vehicles using the services of the cab aggregators.
The invoice is required to be issued by the cab aggregator showing total charges (including charges of the owner or driver of the vehicle). If the cab aggregator shows separate charges for cab aggregator services and services provided by the associated driver/owner, the entire amount of SST charged and collected on behalf of the owner or driver of the vehicle is required to be withheld and deposited by the cab aggregator.
Such amount of SST charged, collected and withheld by the cab aggregator is to be reported separately in Row 14A of the SST Return. In addition to the records already prescribed to be maintained, the cab aggregator is required to maintain records of CNICs of the associated owners or drivers.
INDENTING AND COMMISSION AGENTS
Services provided by indenter are chargeable to SST at the rate of 3% with effect from July 1, 2017. These services were chargeable to standard SST rates for the period from July 1, 2015 to June 30, 2017. Owing to significant litigation and representation from the business community, the reduced rate of 3% has also been provided through Notification No. SRB 3-4/17/2019 for services rendered during the period from July 1, 2015 to June 30, 2017 (with no input tax adjustment) provided such indenters get registered by July 31, 2019 and pay SST liability by August 31, 2019.
CABLE TV OPERATORS
Services provided by Cable TV operators were exempt from SST, subject to certain conditions. The exemption was provided vide SRB Notification-3-4/19/2016 dated November 16, 2016 which expired on June 30, 2018. In order to continue such exemption, Notification No. SRB 3-4/15/2019 dated June 27, 2019 has been issued extending the exemption/concession till June 30, 2020.
Copyright Business Recorder, 2019