Long debate over validity of taxability of transport services which includes inter-city transporters carrying goods from city to city is now come to an undesirable end, so inter-city transport services are now subject to sales tax on services @ 14% (in the case of Sindh).

Several voices against taxing of this services were raised, more specifically transportation and carriage of petroleum oils by roads through oil tankers and transportation or carriage of other goods by non-corporate transporters of goods operating through “Truck Addas”, in Sindh.

Owing to above opposition, Sindh Revenue Board (SRB) held these services (i.e. transportation and carriage of petroleum oils by roads through oil tankers and transportation or carriage of other goods by non-corporate transporters of goods operating through “Truck Addas”, in Sindh) in abeyance till 31 March 2016 or until further orders whichever is earlier. (Circular No. 2/2016 dated 17th March 2016).

However, the abeyance date is passed now, this means that these services are now taxable services without any further discussion. Sales tax on services @14% is applicable from 1st April 2016 i.e. First day after abeyance.

However transport services other than those mentioned above, as always deemed to be subject of Sindh Sales tax @ 14% since enactment.

Notably, companies and other withholding agents under Sindh Sales Tax Special Procedure (Withholding) Rules, 2014 are required to withhold sales tax from invoices received from these transporters, even if these are *unregistered.

*In the case of unregistered service providers invoices received from these service providers are treated as inclusive of sales tax @ 14% and sales tax is calculated using tax fraction formula.

Example

Invoice amount Rs 100
Sales tax calculated using tax fraction (100/114 x 14) Rs 12
Net payment for an invoice (after withholding of sales tax not charged by unregistered supplier) Rs 88
Note: Income tax deduction would be made considering invoice amount (Rs. 100 in our example)

We are providing end to end advisory for dealing matters relating to application of tax and procedurals tasks required to be performed in order to comply with law.