Covid-19: KPRA fears significant decline in services tax collection

PESHAWAR: Like other industries, Covid-19 has badly affected hotels, rest houses and restaurants in Khyber Pakhtunkhwa, owing to which the provincial government was struggling to achieve its service tax collection target for the current fiscal year.

The government had earlier closed down hotels and rest houses at tourist destinations to prevent the spread of coronavirus, leaving thousands of people in the hotel industry unemployed for almost six months.

Sources said after successfully achieving its revenue target for the previous financial year 2019-20 (FY20), the Khyber Pakhtunkhwa Revenue Authority (KPRA) had set a revenue target of Rs20 billion for 2020-21. However, due to coronavirus pandemic and subsequent curbs on tourism industry, the authority “fears a significant reduction in service tax collection”.

But KP Finance Minister Taimur Saleem Jhagra believes that with a better recovery strategy, KPRA could still meet its fiscal target. “Despite the shortage of staff compared to other departments, the department had collected Rs17bn service tax during the previous financial year,” he maintained.

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Briefing the provincial finance minister on the performance of the department, KPRA officials said that before coronavirus, the authority’s revenue was growing at 73pc per month, but the deadly epidemic had severely damaged its growth.

Khalid Ayub, provincial president of the KP Hotel Industry Association, informed that KPRA was currently collecting 2pc service tax from small restaurants, 8pc from high-end restaurants and 16pc from luxury hotels. “The authority used to collect 16pc service tax from all restaurants, but after negotiations with the head of the agency, service tax on small restaurants had been reduced.”

Ayub admitted that no relief was given to hotels and rest houses during lockdown; however, service tax was not collected from them during the same period.

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