Update: Sales tax on services

The Government of Punjab has issued notification No. SO(TAX)1-1/2013-14 dated 22.05.2013, wherein certain services have been subjected to sales tax under The Punjab Sales Tax on Services Act, 2012. This notification shall have immediate effect. The list of services subjected to tax is as under: –

1.         Sales tax @ 16% has been imposed on motels, guest houses, marriage halls and lawns, including pandal and shamiana services.

2.         Previously vehicle tracking services were liable to tax. Now all other tracking services have also been subjected to tax.

3.         Burglar alarm services were previously taxable. The scope of tax has been increased to add “security alarm services” as well.

4.         Exemption of sales tax has been withdrawn on “such amounts received by the Long Distance International License holders including Pakistan Telecommunication Company Limited on International incoming calls under agreement with the foreign telecommunication companies”.

5.         Construction services have been subjected to sales tax @ Rs.100 per square yard for land development and Rs.50/- per square feet for building construction. However, the following shall not be liable to tax.

i)         Construction projects (industrial and commercial) of the value (excluding actual and documented cost of land) not exceeding Rs.50 million.

ii)        The cases where sales tax is otherwise paid as property developers or promoters.

iii)       Government civil works including Cantonment Boards.

iv)       Construction of industrial zones, consular buildings and other organizations exempt from income tax.

v)        Construction work under international tenders against foreign grants-in-aid.

vi)       Residential construction projects where the covered area does not exceed 10,000 square feet for houses and 20,000 square feet for apartments.

6.         Services provided by property developers and promoters (including allied services) have been subjected to 16% sales tax. However, actual purchase value or documented cost of land will not be subjected to tax.

7.         Services provided by a foreign exchange dealer or exchange company or money changer / money exchanger are liable to tax @ 16% on their service charge.

8.         Services provided for personal care by beauty parlors, clinics, slimming clinics including cosmetic and plastic surgery by such parlors / clinics have been subjected to sales tax. However, the following shall be exempt.

i)         if beauty parlor or clinic is not a corporate or chain business; or

ii)        no aspect of the business is trade-marked or franchised; or

iii)       annual turnover does not exceed Rs.3.6 million; or

iv)       annual electricity bills of the business do not exceed Rs.600,000/-.

9.         Management consultancy services including fund and asset management services have been subjected to 16% sales tax.

10.       Services provided by port operators (including airports and dryports) and allied services provided at ports and services provided by terminal operators including services in respect of public bonded warehouses have been subjected 16% sales tax. The value of services will not include amounts received by way of fee under any law or by-law.

11.       Services provided by freight forwarding agents have been subjected sales tax @ Rs.400/- per bill of landing.