Under the Constitution, Sales Tax on Services has historically remained a Provincial domain which led to promulgations of Sales Tax on Services Ordinances 2000 simultaneously by each Province to levy taxes on services on Port related services, Hotels, Restaurants, Clubs and Caterers, Advertisement on Radio and TV and Courier Services etc. Later on other services were also added through other modes.
However while the chargeability under the Ordinances remained with Provinces, the assessment and collection powers were assigned to FBR. After constitutional reforms and consensus developed among the Federation and provinces on sales tax on services being entirely provincial domain, Sindh Revenue Board (SRB) was established to manage, administrate, levy, assess and collect the Sales Tax on Services and subsequently Sindh Sales Tax on Services Bill, 2011 was passed unanimously by the Sindh Assembly on 6th June, 2011 and the Act has been notified on 13th June, 2011. Under the Act Sindh Revenue Board will now collect sales tax on the 'taxable services' with effect from 1st July, 2011, in respect of services provided, rendered, initiated and consumed in Sindh, as per law.
Sindh Sales Tax on Services Rule 2011 provide procedures for the registration of the persons engaged in the activity of the taxable services as specified in the Second Schedule of the Sindh Sales Tax on Services Act, 2011. The procedure for filing of returns by the Registered Persons and the procedure for levy and collection of Sales Tax on the taxable services have been laid down in the Rules.
The "taxable services" as specified in the Second Schedule are generally the same which remained taxable at the Federal level last year ie during the year 2010-11. It has been further decided that the existing taxpayers who were already registered with Federal Government/ FBR will not be required to file application for new registration. They will be automatically registered for Sindh Sales Tax on Services.
They will be assigned the same registration number with prefix S plus NTN ie (S+NTN) and the registered persons will be intimated through email and courier service. It is a self assessment system and return has to be filed electronically. Admissible input tax is adjustable and refundable as was adjustable/ refundable previously under FBR.
Second Schedule of the Act lays down the taxable services which are as under:
Taxable services:
I. Telecommunication
II. Hotels, restaurants, marriage halls, lawns, clubs and caterers
III. Advertisements
IV. Port related services ie Port & Terminal Operators, Shipping Agents, Stevedores, Ship Management Services, Freight Forwarders Custom Agents and Ship Chandlers
V. Courier services
VI. Banking and non-banking services
VII. Franchise services
VIII. Insurance
IX. Property Developers
X. Contractual execution of work or Supplies
XI. Construction services
XII. Money exchangers
XIII. Stock Brokers
XIV. Construction Services
Rules framed under the Act lay down procedures of levy and collection for taxable services. Tax due is payable along with the monthly return to be filed by the 15th day of the following month irrespective of the fact whether return is prescribed monthly or is to be filed quarterly. The tax due shall be deposited in the designated branches of the bank through prescribed Challan form under the head "Sindh Sales Tax on Services".
Salient features of the Act and rules
The taxability under the Act will commence from 01.07.2011. Jurisdiction over the services is provided in Schedule I while taxable services are given in Schedule II.
All persons in Sindh who provide taxable services as part of the Second Schedule will be required to be registered under the Act. The existing taxpayer who is already registered with FBR, but providing services in Sindh shall be deemed to have been registered under the Sindh Sales Tax on Services Act 2011 and will be assigned registration number with prefix S plus NTN. All registered persons will be required to file a return every month (unless the Rules provide otherwise). However, tax is to be deposited every month.
-- Act provides for electronic filing of returns.
-- Act provides for scheme of self-assessment.
-- The Act provides for a complete appellate structure, on the lines of the Income Tax Ordinance, Sales Tax Act and Federal Excise Act.
-- The Act also provides for alternate dispute resolution mechanism.
-- Institution of Ombudsman has been provided under the Act.
Enactment of Sindh Sales Tax on Services Act 2011 is an important way forward to mobilise additional resources which may be used for infrastructure development and to improve basic services delivery and quality of life of the people of the province.