KP Revenue Authority reduces sales tax on 29 services

Sales tax on construction services lowered from 15pc to 2pc; hotels, restaurants, guest houses to be taxed at 8pc

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PESHAWAR: The Khyber Pakhtunkhwa Revenue Authority (KPRA) has notified reduced rates of sales tax on 29 services, as approved in the budget 2020-21, in order to provide tax relief to businesses and encourage investment in important sectors.

“Sales tax on 10 different services has been reduced from 15pc to merely 2pc in the tax relief package offered by the provincial government,” the notification read. “Similarly, ST on five services has been brought down from 15pc to 5pc, while the same has been lowered from 15pc to 8-10pc for six services.” 

The services that would benefit from this “tax relief package” include construction and allied services, hotels and restaurants, workshops, business support services, laboratories, labour or manpower providing services and beauty parlours. 

According to the notification, ST on construction services, which were earlier being taxed at 15pc, has now been brought down to 2pc.

Likewise, sales tax on services provided by hotels, restaurants, guest houses and lodges having local chains has been reduced from 15pc to 8pc. For hotels and restaurants having Restaurant Invoice Management System (RIMS) that works properly, the rate of sales tax would be 5pc. 

“The aim of the package is to provide relief to the public, ensure ease of doing business in the province, encourage tax compliance and ultimately build a tax culture,” KPRA Director General Fayyaz Ali Shah remarked. “Tax compliance will help the government utilise financial resources on socio-economic uplift of the people.”

According to the notification, sales tax on manpower or labour supplying services, business support services, laboratory and testing services and contractual execution service providers, which was 15pc previously, would now be 5pc. 

Airports, dry ports, container terminal service providers and storage or warehouse service providers, which were previously taxed at 15pc, would now pay 10pc.

The ST rate for workshops operating as a standalone business has been brought down from 5pc to 2pc while the same for industrial workshops have been reduced from 10pc to 5pc.  

The sales tax on beauty parlours services has been lowered from 8pc to 5pc and for the medium sized laundry services, ST rate has been reduced from 8pc to 2pc. 

For capital goods’ dealership services, equipment renting services, railway cargo services, underwriter services, indenting services, auctioneering services, erection & commissioning services and quality assurance services, the tax rates have been reduced from 15pc to 2pc.  

Also, sales tax on services provided by property dealers, bargain centres, car wash, Digital or IT firms, call centres and firms or individuals providing cinematographic services has been brought down from 5pc to 2pc.

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