Transcript Provincial Sales Tax and Federal Excise Duty on Services

Provincial Sales Tax and Federal
Excise Duty on Services Collected as
Sales Tax
By
Syed Hammad Raza Zaidi
FCMA
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Scope of the Presentation
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Introduction and Back ground
Legislation by Provinces and ICT
Excise Duty in Sales Tax mode
Issues for further deliberation
Comments / Observation ,Q & A
Introduction
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VAT as principal indifferent to profit and loss during the course
of transactions;
Bifurcation of certain transactions involving both supply of
goods and rendering of services (like getting repaired a car or
dining in a high quality restaurant )
Constitution limitation to the levy of Sales Tax on services
(falling in the “residuary category” )
Excise being the traditional levy
Moving towards VAT mechanism ; hence extending cover of
Sales Tax through Provinces to the services and Excise in
Sales Tax mode
Sales Tax on Services
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Legislation by Provinces and ICT;
(Punjab Sales Tax Ordinance 2000)
(NWFP Sales Tax Ordinance 2000)
(Sindh Sales Tax Ordinance 2000)
(Balochistan Sales Tax Ordinance 2000)
(ICT Islamabad Capital Territory Sales Tax
Ordinance 2001)
Salient Feature of Sales Tax on Services
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Effective Date , July 1st 2000 in provinces.
Territorial Jurisdiction (Respective Provinces) and
ICT
The ordinance extends to whole of the Punjab
and came into force on and from 1st day of July,
2000.
Rate of 15% of the value of taxable services
rendered or provided.
CBR’ s authority and responsibility
Salient Feature of Sales Tax on Services
(contd)
Scope
(a) Services Covered Services provided or rendered by hotels,
marriage halls, lawns and caterers;
(b) Advertisements on TV and radio excluding advertisements –
if sponsored by a Government Agency for health education;
 if sponsored by Population Welfare Division relating to Sathi
educational promotion campaign funded by USAID; and
 public service messages if telecast on TV by World Wild Life Funds for
nature and UNICEF.
(c) Services provided or rendered by persons authorized to transact
business on behalf of customs agents, ship chandlers and stevedores;
(d) Courier services.
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(Contd)
Salient Feature of Sales Tax on Services
(Contd)
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Machinery provisions of Sales Tax Act 1990
Enforcement by CBR
Notifications (SRO’s) by CBR (Revenue
Division)
Adjudication etc
Generally Replacement of Excise Duty
Comparison with and Difference from AJK
legislation on Sales Tax
Excise Duty in Sales Tax mode
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Federal Subject
Like Sales Tax (under Sales Tax Act 1990): Enforcement and
application
Rates (a) 15% of the value of the services
(b) 5% of the value of the services
(c) Specific rate
Major Areas Covered
Telecommunication services; 15%
Air travel; 15%
Cargo by air: 15%
(Contd)
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Excise Duty in Sales Tax mode
(Contd)
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Areas Covered (contd)
Insurance
5%
Shipping Agents 15%
Banking services 5%
Cable TV operators Rs 25 per connection
Franchise Service 5 %
Excise Duty in Sales Tax mode
(Contd)
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SPECIAL PROCEDURE FOR PERSONS PROVIDING OR RENDERING SERVICES SUBJECT TO SALES TAX UNDER THE
PROVINCIAL LAWS (CH. X OF SPECIAL PROCEDURE RULES, 2006)
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Fixation of Values and certain exemptions like Advertisements on T.V. and Radio; Services provided by stevedores
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Exemption to Courier Services for internal correspondence
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SPECIAL PROCEDURE FOR PAYMENT OF SALES TAX ON SUPPLY OF
FOOD (CH.
IX OF SPECIAL PROCEDURE RULES, 2006)
food, drinks and other eatables supplied by hotels, restaurants, clubs, caterers, parlour,
kitchens and other such similar establishments, whether for consumption inside the premises
of such establishments, or for supply for outside consumption including consumption in the
canteens and messes, etc.
Every person supplying food, in or from the premises of club, caterers, kitchens, hotels or
restaurants shall be required to charge and pay sales tax at the rate specified in sub-section
(1) of section 3 of the Sales Tax Act irrespective of the fact that the food is consumed in that
premises or supplied or catered outside or supplied as ‘take-away’.
The sales tax on food served in a tax period shall be calculated in accordance with the
following formula:
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Total value of supply due from
Amount of Sales Tax = consumer or recipient of food x
100 + rate of sales tax
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Rate of sales tax
The food supplied by flight-kitchens on-board the conveyance leaving for a destination
outside Pakistan shall be zero-rated
Issues for Further Deliberation
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Threshold Rs 5 million;
Bifurcation of Services rendered and Goods supplied
(dining in a restaurant of a five star hotel with or without
live music; or Supply of software);
Manufacturer v service provider ; composite character
Input tax out put apportionment in both cases
A political issue :generation of tax /revenue at the place
of consumption v. at place of registered office of the
company/ legal entity.
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Issues for Further Deliberation
(Cont)
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Burden on the ones already paying taxes
Unorganized sector’ s evasion
Compliance v enforcement
Further legislation to incorporate future changes
in Sales Tax Act ;
Exemption regime
Simplification as in case AJK legislation (Future
changes in Sales Tax Act 1990) to become part
automatically
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Comments /
Observation ,Q & A
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Thanks
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