The Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the Punjab government to reduce the General Sales Tax on telecom services from 19.5 per cent to 13 per cent in the budget 2022-23.
In its tax recommendations to the Punjab Revenue Authority (PRA), the OICCI recommended that the sales tax rate on telecommunication services be brought in line with other services. It implies that the sales tax rate on telecommunication services should be equal to the General Sales Tax rate on services in order to bring all sales tax on services rates into alignment. According to the report, this will enhance tax collections by enabling telecom operators to exploit Pakistan’s lower-income population.
The OICCI stresses that exemption for both life insurance and health insurance, stating that as both do not fall within the scope of the definition of service, should be permanently included in the list of exempted services.
It’s further requested that a policy board should be formed to ensure synchronised policies, standardised taxable services, basis of apportionment of revenues and removal of all anomalies/conflicts between the laws of the different revenue boards.
To avoid double taxation “toll manufacturing” should be deleted from the list of services, as it is taxable under the Federal Sales tax. Withholding Sales Tax Rules should be amended by virtue of which withholding among registered service providers and registered service recipients should be in line with FBR.
Circular No 01 of 2013 to be abolished, due to which, payment of sales tax on electronic media advertisement services should be in line with other jurisdictions (like SRB, KPK, BRA and FBR) instead of turnover or population percentage basis.
The PRA sales tax rates on services should be aligned with the Sindh sales tax rate, which is 13 per cent and this rate should be consistent for all services except those services which are currently subject to reduced rates. The current rate should be maintained for unregistered entities. The rate gap will encourage the registration of the unregistered taxpayers to avail of the benefits of input adjustment and will enhance documentation.
Necessary amendments should be made in section 70, Chapter X of Punjab Sales Tax on Services Act 2012, regarding recovery of tax demand from running finance facility of the taxpayers, which is inconsistent and against the principles of natural justice and detrimental to the business operations of the taxpayers as no tax demands can be recovered from the liabilities of the taxpayer.
Under Islamic financing transactions executed by Islamic banks for the purchase of immovable property, the property should be kept in the bank’s name and upon expiry/termination of the financing, agreement property should be transferred to the name of the borrower. In this scenario, the registration fee, stamp duties, district, municipal or town taxes, capital value tax, etc are applicable twice. i.e. at the time of execution and also at the time of maturity/termination of the financing agreement. Therefore, in order to avoid duplication of these duties and taxes, the Islamic banks just like conventional ones keep the property in the name of the borrower.
The OICCI also recommended that under the powers delegated through Section 9A of Stamp Act 1899 and Section 7(10) of the Finance Act, 1989, the provincial government may issue the following SRO/notification and publish it in their respective official gazette.
“The registration of sale or purchase of immovable property by banks or financial institutions under any Islamic mode of financing arrangement approved by State Bank of Pakistan or Securities and Exchange Commission of Pakistan shall be exempt from the levy of the registration fee, stamp duty, district, municipal/ town taxes, capital value tax or any other related taxes.”
Special procedures should be introduced for the chargeability of sales tax on the services of ‘labour and manpower. These services are highly essential for conducting business and very strong support for enhancing employment opportunities in the province. It would be clarified that reimbursement is not revenue for service providers in any manner.
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