The Sindh government has proposed significant changes to its tax system in the FY2025-26 budget, including a 2% reduction in the sales tax on services to 8% to simplify the process and reduce the financial burden on both businesses and individuals, while also removing five existing levies completely in the next fiscal year.
One of the major changes is the shift from the current Positive List system for Sindh sales tax to a Negative List system. Under this new system, all services will be taxable, except for those specifically listed as exemptions.Â
This move is expected to broaden the sales tax base, minimise disputes, and reduce litigation over the taxability of services.
In the current system, only a small segment of services is exempt from tax, leading to frequent disputes. The new Negative List approach aims to resolve these issues by taxing all services while ensuring that essential and social services remain exempt, and that some newly taxable services are subjected to reduced rates.
To protect small businesses, the budget also includes a provision exempting businesses with an annual turnover below Rs 4 million from sales tax obligations.
These reforms are part of the Sindh government’s broader efforts to streamline its tax system, expand revenue collection, and simplify the process for taxpayers.
