PESHAWAR: In another tax relief package, the Khyber Pakhtunkhwa government proposed lowering and streamlining sales tax on 31 different services in the province.
According to a press release from the Khyber Pakhtunkhwa Revenue Authority (KPRA), sales tax on 10 different services has been reduced to just 1% for fiscal year 2021-22. Last year, Khyber Pakhtunkhwa’s government cut VAT on 29 different services as a tax break package for businesses, and this year VAT rates for various sectors have been reduced and streamlined mainly at the request of the taxpayer community.
To relieve the business community, Prime Minister Khyber Pakhtunkhwa Mahmood Khan and KPRA Finance Minister Taimur Khan Jhagra issued specific instructions to the KPRA to lower tax rates for certain sectors related to services. The changes to the sales tax on services were proposed in the Finance Law 2021, which will be passed by the Provincial Assembly in the current budget meeting.
“On instructions from Chief Minister Mahmood Khan, we are taking special measures to compensate the economy affected by the pandemic. The tax break for the second year in a row is one of the measures the provincial government is taking to mitigate the impact of the pandemic on businesses, especially in the service sector, ”Finance Minister Taimur Khan Jhagra said in his message.
According to the data, the sectors included in the 1% tax plate include Print Media Ads, Real Estate Agents, Agricultural Cold Storage and Storage, Industrial Repair Services, Car Wash Services, Film Services, Quality Assurance and Inspection Services, Auctioneers, Installation and Commissioning Services, and Sub Writer Services.
To encourage tourism in the province, the government has cut sales tax on hotels and restaurants in the Naran and Kaghan regions of the province from 8% to just 5%. Similarly, services related to mines and minerals, including government royalties and licenses, which were previously taxed at a rate of 15%, have been reduced to just 2%. Agriculture-related services, which fall under different tax rates, have been reduced to a single rate of 2%. Sales tax on club services and sales tax on local individual hotels and local hotel chains have been reduced from 15% to 8%.
The tax rates for a few services that were reduced in 2020-21 have been streamlined at the request of corporate taxpayers and reduced to standard rates as their back and forth business link is fully documented and they require normal input tax adjustments not at their end, but also for your business customers.
Khyber Pakhtunkhwa Finance Minister Taimur Khan said: “The government is determined to help the businesses in the province. Last year the incumbent government had provided a tax relief package in the budget, and this year additional sectors were proposed to be included in the reduced tax plate at minimal rates.
The government wants to encourage investment in the province and increase tax compliance and tax base, ”said Fayyaz Ali Shah, director general of KPRA, in his statement.
Copyright Business Recorder, 2021