background of sindh sales tax on services!
The Sales tax even on goods historically has remained the domain of the provinces. Under 1935 Act it was within the jurisdiction of the provinces. After creation of Pakistan in 1948 for meeting the security and strategic needs of the country for temporary period it was transferred to federation. However later on it was placed with federation on permanent basis in 1951. When the 1973 constitution was framed sales tax on goods was retained with Federation while sales tax on services became domain of the provinces as services neither were reflected in federal legislative list nor in concurrent list. It was this reality and legal position that when in the year 2000 a need was felt to tax Port related services and Hotels, Clubs. Caters and Couriers, each province promulgated an ordinance known as Sales Tax Ordinance 2000 and power for assessment and collection were assigned to FBR then known as CBR. The way tax collected under provincial law was distributed horizontally created problems and issues. The matter was considered and discussed in the 7th Finance commission and a unanimous decision was made to recognize jurisdiction of provinces on sales tax on services and allowed provinces to collect sales tax on services if they so desire. Later on during the 18th amendment entry No-49 & the Federal Legislative list was amended and Sales Tax on Services was declared out of domain of federation.
In spirit of the Constitution and 7th NFC Award, the Governments of the Punjab and the Khyber Pukhtunkhwa in their respective finance bills 2010 expanded the coverage of taxes by amending schedule of taxable services by the respective provincial ordinances on sales services 2000 and included Banks and other Financial Institutions, insurance and Telecommunication in their area of jurisdiction which earlier were being taxed under FED. Pursuant of the 7th NFC award the Government of Sindh (GoS) decided to take control and Management of the sales tax on services. Accordingly the Sindh Revenue Board Act, 2010 was promulgated in June, 2010. The Act provides for the creation of Sindh Revenue Board (SRB) to manage, supervise, collect and take all such actions as are necessary towards the administration of sales tax on services. The Board is headed by a Chairman, assisted by not less than four Members, each being the functional head of Operations, Legal Affairs & Coordination, Support Services and Audit, respectively.
Sindh waited for more than one year to bring changes and extend provincial scope on the services which in case of Punjab and Khyber Pukhtunkhwa was done in 2010 through respective financial bills which were approved by the both provincial assemblies. The Sindh assembly was the third assembly which finally unanimously passed the Sindh Sales Tax on Services Act 2011. The 6th June 2011 will go down as a historic day in the legislative history of the country .This day the Provincial Assembly of Sindh proclaimed and asserted its constitutional right to levy, assess, collect and generally administer Sales Tax on Services provided, rendered, initiated, received or consumed in the Province of Sindh. Under the 2011 Act jurisdiction of province has been expanded on the pattern of Punjab and Khyber Pukhtunkhwa and new services including Banking, Modorbas Non-banking Financial Institutions, Insurance, Reinsurance and Telecommunications etc. have been brought under provincial domain.
The Sindh sales tax on Services Act 2011 has repealed the Sindh Sales Tax ordinance 2000 and has empowered the Sindh Revenue Board for management, administration and collection of Sindh sales tax on Services. Since the Sindh Sales Tax Ordinance 2000 stand repealed as such the authority which was provided under the ordinance 2000 to FBR to collect taxes on some services is also no more available with FBR and now all taxes are legally required to be paid directly in the Head Account of the Sindh Sales Tax on Services Government of Sindh.