PESHAWAR: The Khyber Pakhtunkhwa Revenue Authority (KPRA) is committed to executing the provincial government directives for broaden the base of sales tax on services in the province as the authority has already registered a 300 percent increase in the collection of Sales Tax on service in the last financial year.
It is to be noted that the KPRA has been established after the passage of 18th Constitutional Amendment which devolved the power to the provincial governments to collect sales tax on services.
The official sources said that the KPRA managed to increase the revenue collection to Rs8 billion last year, showing an exponential increase in the collection of such taxes. The province had reportedly received Rs2.5 billion under sales tax on services during the year ended June 30, 2013 and now through its own efforts, it has able to increase it by 300 percent.
The sources said the department had seven groups of services provider in the second schedule of Finance Act 2013 but now another 38 services had been added to the tax net. Prominent services added to the tax net this year include different sections of services sector such as security companies, shipping and freight, manpower recruitment and supply services, construction, advertising agents, property and real estate agents, automobile, franchise services, manufacturing and processing on toll bases, contract execution, architects and planners, consultants, port operations, mining of minerals, exploration of oil and gas related services, event management-related services, cosmetic and plastic surgery, sale of space for advertisement services, TV, radio and production house services, and services rendered by clubs and broadcasting services.
According to the sources, most important aspect of the tax policy of the province is an effort to rationalize the tax rate and bring into the net the services ordinarily not directly related to the ordinary citizens of the province. A new beginning has been made by reducing the tax rate for some of the services without any input adjustment.
This will reduce the inflow of duplicate or incorrect claims by the services for input adjustment and refunds against the tax payable on the services provided by the registered persons. Previously, only a few groups of services like finance, telecom, courier and different kinds of agents were subjected to sales tax in the province.
According to experts, important service sectors now added to the tax net will result in substantial increase in the provincial tax revenue. The provincial government has contracted the services of two senior officers of the FBR to establish the systems.
The authority will start an awareness and facilitation scheme for enrolment of service providers falling in the above-mentioned categories and those already assessed for sales tax under the 2013 Act. The KPRA has set Rs12 billion revenue collection target for the current year. Last year, sales tax on services amounting to nearly Rs8 billion was collected, which is the highest margin of increase recorded by any other revenue agency in the country.
It is to be noted that the KPRA has been established under the Excise and Taxation Department with the mandate to collect Sale Tax on services.
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