Proposed Changes in the Punjab Sales Tax on Services Act, 2011 through The Punjab Finance Bill, 2014

PROPOSED CHANGES IN THE PUNJAB SALES TAX ON SERVICES ACT, 2012

 THROUGH FINANCE BILL 2014-15 

Section 2        Definitions

• In clause (29) “Person”, an amendment has been made and now ‘Association of person (AOP) ” is proposed to be included in the definition of ‘person’

• In clause (38) Service or services, an amendment has been made in the “Explanation”. After proposed amendment a service shall remain and continue to be treated as a service even if rendering thereof involves any use, supply, disposition (transfer, removal or disposal) or consumption of any goods either as an essential or as an incidental aspect of such rendering.

• In clause (43) “tax fraud” intention of not paying has also been proposed to be brought in to the ambit of tax fraud.

Section 7         Value of a taxable service

• An amendment is proposed to be made in sub-section (1). By virtue of proposed amendment gross amount of consideration will be the value of supply. This amendment is proposed to set at knot the controversy of value of taxable service in certain cases i.e. security service etc. where amount of salary/ wage was also being charged / collected by the service provider.

Section 25       Registration

• In section 25, an explanation is proposed to be inserted and no one will be absolved from his tax liability for want of registration under the Act. Proposed explanation reads as under:-

“Explanation.- Unless otherwise specified, no person shall be absolved of any tax liability for want of registration under this Act or the rules”;

Section 29A    Restoration of Registration

• A new section 29A is proposed to be inserted empowering authority to restore, revive or reinstate a registration which has been suspended, cancelled or de-activated. Previously there was no legal provision for restoration of registration. Proposed section reads as follows:-

“29A. Restoration of registrations.– The Authority may, subject to conditions as may be prescribed, reactivate, revive, reinstate or restore any registration which has been de-activated, suspended or cancelled for any reason or under any circumstances.”;

Section 31       Records

• Certain amendments have been proposed in section 31. It is proposed that persons paying tax under the Act are also required to maintain and keep record under the Act. Through this amendment, it is proposed that un-registered persons providing taxable service shall also be required to maintain and keep records of taxable services provided by them.

• Scope of powers of Authority to declare number of accounts used by persons providing services has been enhanced and now authority can also notify the same in case of persons receiving the services.

Section 48       Offences and Penalties

• Penalty for non submission of registration application by a person supplying taxable services is proposed to be enhanced from Rs. 10,000/- to Rs. 50,000/-.

• Non-payment of due amount by a recipient of service is also proposed to be covered under the offence of obstruction. A new proviso is proposed to be added in the relevant entry mentioned under serial No. 10. The following proviso is proposed to be inserted:

“Provided that where any recipient of a service does not pay the amount of tax due to be paid to a service provider, such recipient shall also be liable to action for obstruction under this provision.”;

Section 52       Recovery of tax not levied or short-levied

• Period for issuance of show cause notice for recovery of tax not levied or short levied is proposed to be enhanced from 3 years to 5 years.

Section 70       Recovery of arrears of tax

• An amendment is proposed in section 70 of the Act. It is proposed that the officers of the Authority shall exercise powers and functions of civil court. Proposed subsection is as under:- empowered In section 70, after sub-section (2), the following sub-section (3) is proposed to be inserted:

“(3) For the purpose of recovery of tax, penalty or any other demand or sum under this Act or the rules, the Authority or the officer of the Authority may exercise the powers of a Civil Court under the Code of Civil Procedure, 1908 (V of 1908) for recovery of an amount due under a decree and, in such an eventuality, the Authority or the officer of the Authority shall be deemed to be a Civil Court.”;

 

PROPOSED CHANGES IN THE SECOND SCHEDULE TO THE ACT

Serial No.1

• “Race clubs” classified under heading 9830.0000 are proposed to be included and in the ambit of clubs and services of the same will be taxable under PRA..

Serial No.4

• Scope of courier services is proposed to be enlarged.  Cargo service by passenger transport co. i.e. Daewoo Bus Service, Faisal Movers etc. and transport through pipe line and conduit services classifiable under heading 9804.9000 i.e. transportation of petroleum products form one container terminal to another are proposed to be taxable @16% under the entry No. 4.

Serial No.8

• The entry is proposed to be substituted with a view to enlarge scope of services by banking companies by including services of cooperative financial societies, modarbas, musharikas Ijarahs and leasing companies. Proposed and existing entries reads as follows:-

Proposed Entry:

“Services provided by banking companies, cooperative financing societies, modarbas, musharikas, Ijarahs, leasing companies, non-banking financial institutions and other persons, businesses or enterprises providing or dealing in any such services.”

Existing Entry:

“Services provided by Banking Companies or Non-Banking Financial Institutions including but not limited to all non-interest based services provided against a consideration in form or a fee or commission or charge.”

Serial No.11

• Services of Cafés, food (including ice-cream) parlors, coffee houses, coffee shops, deras, food huts, earteries, resorts and similar cooked, prepared or ready-to-eat food service outlets etc. classifiable under heading 9801.9000 are proposed to be taxed @16% besides ‘restaurants’.

Serial No.13

• Services of intellectual property rights classifiable under heading 9839.0000 are proposed to be taxed @16% under the entry “Franchise Services”

Serial No.14

• Threshold of exclusion as mentioned under heading ‘Construction services’ are proposed to be restricted to Rs. 50 million per annum instead of project of Rs. 50 million.

Serial No.18

• Exclusion available to the beauty parlor having annual electricity bill less than Rs. 600,000/- per annum is proposed to be linked to the condition that facility of air-conditioning is not installed or available in the premises of beauty parlor. 

Serial No.19

• Scope of management consultancy is proposed to be enhanced and such services with regard to ‘investments’ are also proposed to be included in the taxable services under this serial No.

Serial No.23

• Services of technical inspection and certification services, quality control (standards’ certification), technical analysis and testing, erection, commissioning and installation services classifiable under headings 9861.0000 and 9815.5000 are also proposed to be included in the services of technical scientific and engineering consultants.

Serial No.24

• Scope of services provided by other consultants is proposed to be enhanced to human resource and personnel development services, exhibition or convention services, even management services, valuation services (including competency and eligibility testing services), market research services and credit rating services classifiable under headings 9832.0000, 9827.0000, 9818.3000, 9818.2000, 9819.9300, 9852.0000 and 9859.000. The proposed entry will be as under:-

“Services provided by other consultants including but not limited to human resource and personnel development services, exhibition or convention services, even management services, valuation services (including competency and eligibility testing services), market research services and credit rating services.”

Serial No.25

• Services of travel agents including all their allied services or facilities classifiable under heading 9805.5000 and 9803.9000 are proposed to be liable to payment of sales tax @16%.

Serial No.26

• Labour and manpower supplies services are also proposed to be included in the list of taxable services beside “Manpower recruitment agents”.

Serial No.30

• Scope of services provided by share transfer agents is proposed to be enlarged through substitution of the existing entry. The following is proposed to be inserted:

“Share transfer or depository agents including services provided through manual or electronic book-entry system used to record and maintain securities and to register the transfer of shares, securities and derivatives.”

Serial No.32

• It is proposed that the purview of services provided by property dealers be expanded by including “services provided by realtors classifiable under heading 9844.0000” also.

Serial No.33

• It is proposed that the services of fashion designers shall be taxable whether they relate to textile, leather, jewellery or other product regimes including allied services such as cutting, stitching, printing, manufacturing, fabrication, assembly, embellishment, adornments, display (including marketing, packing and delivery etc.). Proposed amendment / addition reads as under:-

“whether relating to textile, leather, jewellery or other product regimes including allied services such as cutting, stitching, printing, manufacturing, fabrication, assembly, embellishment, adornments, display (including marketing, packing and delivery etc.).”

Serial No.36

• Services provided by car / automobile dealers classifiable under heading “9845.0000” are also proposed to be added in the list of taxable services.

Serial No.37

• Services of industrial and commercial packaging and similar outsourcing of industrial or commercial processes classifiable under headings 9841.0000 and 9819.1400 are also proposed to be included under services of manufacturing or processing on toll or job basis.

The following new services are proposed to be added in the Second Schedule of the Act (Taxable Services). New entries and sales tax rates reads as under:-

Sr. No.	Description	Classification	Rate of Tax
(1)	(2)	(3)	(4)
“38	Services provided by specialized workshops or undertakings (auto-workshops; construction and earth-moving machinery or other special purpose machinery etc; workshops for electric or electronic equipments or appliances etc. including computer hardware; car washing or similar service stations and other workshops).	98.20	Sixteen percent
39	Services provided for specified purposes including fumigation services, maintenance and repair (including building and equipment maintenance and repair including after sale services) or cleaning services, janitorial services, dredging or desilting services and other similar services etc.	98.22 and 9860.0000	Sixteen percent
40	Brokerage (other than stock) and indenting services including commission agents, under-waters and auctioneers.	9829.0000, 9819.1200, 9819.1100, 9819.1300 and 9819.9100	Sixteen percent
41	Call centres	9865.0000	Nineteen and a half percent
42	Services provided by laboratories other than services relating to pathological or diagnostic tests for patients.	9816.0000 and 98.17	Sixteen percent
43	Services provided in specified fields such as health care, gym, physical fitness, indoor sports, games and body or sauna massage etc.	9821.1000 and 9821.2000 9821.4000	Sixteen percent
44	Services provided by laundries and dry cleaners.	9811.0000	Sixteen percent
45	Services provided by cable TV operators	9819.9000	Sixteen percent
46	Services provided by TV or radio program producers or production houses.	9828.0000	Sixteen percent
47	Advertisements (including classified ads) in newspapers, magazines, journals and periodicals.	9802.4000	Five percent”