Supply chain management and distribution (including delivery) services are chargeable to Sindh sales tax at the rate of 13% ad valorem under section 8 of the Act, 2011, Sindh Revenue Board (SRB) said in a recent letter to the Pakistan Business Council (PBC).
In the letter, SRB asked the PBC to advise all the council members involved in supply chain management and distribution services to comply with the provisions of the Act, 2011, and get themselves registered, charge and collect Sindh sales tax on the said services and deposit the same into Sindh Government’s Head of Account B-02384 in the time and manner prescribed under the Act.
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The board mentioned that the said services have been covered under tariff heading 9845,0000 of the Second Schedule to the Sindh Sales Tax on Services Act, 2011, since July 1, 2016.
The letter further said officers of SRB adjudicated cases against several distributors working under contract with their principals for compulsory registration under the Act, 2011, for providing aforesaid stated services.
“Those distributors filed appeals taking the position that they were engaged in purchase and sale of goods and they were not providing any service.
“[However], Their appeals were dismissed both by Commissioner (Appeals), SRB, and the Appellate Tribunal SRB.”
The letter continued that the distributors then filed Special Sales Tax References before Sindh High Court (SHC).
After examining the matter in detail, according to SRB, the court said the appellants (distributors) were liable to be registered under the 2011 Act and the Rules made thereunder.
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SRB said SHC’s judgement stated that the nature of transaction of sale/purchase of goods between the manufacturer and the applicant established through the agreement/appointment letter aims to propel a service performed by the applicant “which could rightly fall under the head of supply chain management/distribution (including delivery) service, hence attracts the provisions of the 2011 Act, and the Tribunal did not misinterpret or misapply the relevant tariff heading 9845.0000 to the case of the applicant (distributors)”.
The letter also mentioned that the civil petitions seeking leave to appeal were dismissed by the Supreme Court vide order dated 26.01.2024.