PSX calls for resolution of sales tax jurisdiction issues at CCI, urges reforms in minimum tax regime

The Pakistan Stock Exchange (PSX) has urged federal and provincial governments to bring the issue of jurisdictional differences over the collection of sales tax on services to the Council of Common Interests (CCI). The PSX emphasized the need for a unified revenue-sharing formula for provinces to address the overlapping tax laws, which are currently causing confusion and affecting the services sector.

According to the PSX, provincial sales taxes apply to services such as fund and asset management, but the laws enacted by the Sindh Revenue Board, Punjab Revenue Authority, and Khyber Pakhtunkhwa Revenue Authority conflict with one another. While Sindh’s law specifies that sales tax is due where the business is registered, Punjab and Khyber Pakhtunkhwa laws assert that sales tax is to be levied in the province where the service is provided. 

The provincial sales tax rates on services typically range between 15% and 16%, with some provinces charging a higher rate of 19.5% on telecommunication services. This disparity has created confusion, particularly for companies listed on the PSX, which are affected by the ongoing dispute over tax collection.

The PSX has asked for these concerns to be addressed at the CCI so that a consistent and fair formula can be established for all provinces.

The stock exchange also included this issue in its budget proposals for FY26, which have been submitted to the Ministry of Finance. The PSX, which facilitates trading for around 550 companies with a combined market capitalisation of Rs 14.73 trillion (approximately $52 billion, or 12.7% of Pakistan’s GDP), expressed concern that the current tax dispute is impacting the entire services sector.

In its budget proposals, the PSX further recommended the elimination of the minimum tax regime for listed companies, arguing that such firms are highly compliant with documentation requirements and already meet extensive regulatory standards. The imposition of a minimum tax, the PSX stated, negatively affects the earnings of these companies despite their compliance with tax regulations.

The PSX also proposed a series of measures aimed at encouraging the growth of small and medium enterprises (SMEs), which contribute significantly to Pakistan’s employment and GDP. The stock exchange suggested offering tax credits of up to 50% for listed SMEs for the first 3-4 years and 20% thereafter, to incentivize more SMEs to list on the exchange.

Additionally, the PSX called for aligning capital gains tax (CGT) rates on the sale of securities with those on immovable property and proposed harmonizing CGT rates for derivatives and future contracts traded on the PSX with those on commodity contracts traded on the Pakistan Mercantile Exchange (PMEX). 

The PSX also requested tax relief to encourage foreign investment in the market and stressed the need for digitization in payment systems and the documentation of the economy to increase transparency and market participation.