KARACHI: The Sindh government has set an ambitious tax collection target of Rs388 billion for the Sindh Revenue Board (SRB) for the upcoming fiscal year 2025-26. This represents a significant increase of approximately 20 percent compared to the previous year’s target, underscoring the province’s heightened focus on strengthening its financial autonomy through local resource mobilization.
According to official budget documents, the SRB was initially tasked with collecting Rs350 billion in the outgoing fiscal year but is estimated to fall short, with actual revenues anticipated around Rs324 billion. The revised, higher target for FY26 highlights the provincial government’s determination to enhance revenue generation amidst rising developmental needs and growing international financial obligations.
SRB’s expanded role & fiscal strategy
The Sindh Revenue Board, primarily known for collecting sales tax on services within the province, has now been entrusted with the additional responsibility of collecting agricultural income tax. This expanded mandate is a crucial component of Sindh’s broader strategy to diversify its revenue streams and reduce reliance on federal transfers.
In his budget speech, Sindh Chief Minister Syed Murad Ali Shah emphasized the critical need to align provincial expenditures with available revenues. He stated that generating additional funds from indigenous sources is imperative given the province’s growing developmental agenda and financial commitments. The Chief Minister also assured that the government had made concerted efforts to minimize the impact of new tax measures on lower-income segments of the population.
Key fiscal reforms: Shift to negative list regime & incentives
A cornerstone of Sindh’s fiscal reforms for FY26 is the transition from the existing Positive List to a Negative List regime for Sindh sales tax on services. Under this new framework, all services will be considered taxable unless they are explicitly exempted. This strategic shift is designed to expand the tax base significantly, reduce tariff-related disputes, and streamline the overall tax collection processes. However, essential and social services will continue to remain exempt, and certain newly taxed services will be subjected to reduced rates to ease their introduction.
To further support businesses and promote economic inclusivity, several facilitative measures have also been announced:
The sales tax rate on services currently taxed at 10% will be reduced to 8%.
To enhance vehicle safety and public welfare, the sales tax on third-party vehicle insurance will be significantly cut from 15% to 5%.
The exemption threshold for restaurants and caterers has been raised from an annual turnover of Rs2.5 million to Rs5 million, providing relief to small and medium-sized enterprises in the hospitality sector.
Procedural simplifications are slated for implementation, including easier registration processes and expanded options for reduced-rate services.
Through these comprehensive changes, the Sindh government aims to empower the SRB to meet its ambitious collection target while fostering a more inclusive economic environment and reducing the compliance burden on smaller enterprises. The effectiveness of these reforms in strengthening Sindh’s fiscal framework and ensuring sustainable revenue growth will be a key focus in the upcoming fiscal year.
