Peshawar    -   The Khyber Pakhtunkhwa government has notified a substantial decrease in rates of sales tax on dozens of services in the province in order to provide relief to businesses and encourage tax compliance.

The government has issued notifications making changes in the second schedule for reducing rates of sales tax on 29 services as approved in the budget 2020-21. 

According to a press release issued by the KP Revenue Authority (KPRA), sales tax rates on 10 different services have been reduced from 15% to merely 2% in the tax relief package given by the provincial government. 

Similarly, 5 services have been brought down from 15% slab to 5%, while, 6 services have been brought down from 15% rates to 10% and 8%. The services which fall in the reduced rates include construction and allied services, hotels and restaurants services, workshops, business support services, laboratory services, labour or man power providing services and beauty parlors.  

According to the notification, the construction services sector which was earlier taxed at the rate of 15% has now been brought down to 2%. The sales tax on services provided by hotels, restaurants, guest houses and lodges having local chains have been reduced from 15% to 8% while, as an incentive the hotels and restaurants having Restaurant Invoice Management System (RIMS) that works properly, the rate of sales tax on services will be only 5%.  

“The aim of the tax package is to be provide relief to the public and ease business in the province with encouraging tax compliance which would help in building tax culture,” said Fayyaz Ali Shah, the Director General KPRA. 

“Tax compliance would ensure financial resources with the government to be spent on socio-economic uplift of the people,” he said. 

According to the notification, the sales tax rates on manpower or labour supplying services, business support services, laboratory and testing services and contractual execution service providers that was 15% will now be taxed at 5%. 

Similarly, the airports, dry ports, container terminal providers and storage or warehouses service provider that were used to be taxed at 15% will now pay 10%. The sales tax rate for workshops operating as standalone business have been dropped down from 5% to 2% while, the rates for industrial workshops have been reduced from 10% to 5%. 

The sales tax on beauty parlour services which was 8% is now reduced to 5% and for the medium sized laundry services the sales tax rates have been reduced from 8% to 2% only. For the capital goods dealership services, equipment renting services, cargo services by railways, services of underwriters, indenting services, auctioneering services, erection and commissioning services and quality assurance services the tax rates have been reduced from 15% to 2%. 

For the services provided by property dealers, bargain centres, car wash, digital or IT firms, call centres and firms or individuals providing cinematographic services the sales tax rate has been brought down from 5% to 2%.