Collection of sales tax: FBR advises banks to maintain status quo for a few days

The Federal Board of Revenue (FBR) has informed the banks to maintain status quo till Sindh Revenue Board (SRB) authorises the FBR to collect sales tax on financial services including banks. An FBR official told Business Recorder here on Tuesday that a meeting took place between banks and the FBR at the Board's Headquarters on the initiative of the Pakistan Banks Association (PBA).
The meeting was chaired by FBR Member Inland Revenue Khawar Khurshid Butt along with sales tax officials. During the meeting, the banks sought clarification as to whether the federal excise duty (FED) or provincial sales tax is to be paid in the Sindh province. Banks also asked the FBR to clarify whether the banks would file sales tax and federal excise returns with the FBR or sales tax return with the Sindh Revenue Board (SRB).
FBR officials informed the banks that the SRB would issue a notification in few days to authorise the FBR to collect sales tax in financial services, including banking, insurance, stock market operations, etc, advertising services, construction services, franchising services and other services that constitute a significant proportion as inputs into other supplies and involve transactions across provinces. As soon as the SRB would issue the relevant notification in this regard, the FBR will start collecting sales tax on financial services. The competent authority of the Sindh government would give its consent letter to the FBR for collection of sales tax on the said services and consequently the FBR would abolish federal excise duty (FED) on services.
In the meantime, the FBR has advised the banks to maintain status quo for only a few days, till the SRB gives something in writing or issues the relevant notification, FBR official said. On the issue of withholding tax deductions and payment, the FBR and the banks agreed to exchange working papers.
The issues of the banks would be conveyed to the FBR and the tax authorities would inform withholding tax related issues to the banking sector. The next meeting between the FBR and the banks would be convened after Eid and issues pertaining to withholding taxes would be resolved by mid-September. Banks also informed FBR about the problems in filing of withholding tax statements. The FBR's Web Portal is not receiving withholding tax statements where Computerised Payment Receipt Number (CPR) is not available.