Definations Section Handout PDP 13 KTBA FE and ST On Services SUH

General Concepts of Federal Excise and Sales Tax On Services in Pakistan
Handout PDP 2013

Karachi Tax Bar Association Page 1

OUTPUT TAX
The Federal Excise Act, 2005/ Provincial Ordinances
The Sales Tax Act, 1990- Section 2(20)
Output tax, in relation to a registered person, means-
(a) tax levied under this Act on a supply of goods, made by the person;
(b) tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the
goods, or the rendering or providing of the services, by the person;
(c) Provincial sales tax levied on services rendered or provided by the person;

The Sindh Sales Tax on Services Act 2011 Section 2(62)
Output Tax in relation to a registered person, means the tax levied under this Act on the services provided or rendered by the
person

The Punjab Sales Tax on Services Act 2012 NO Definition

The Khyber Pakhtunkhwa Finance Act 2013 NO Definition

PERSON
The Sales Tax Act, 1990- Section 2(18)
The Punjab Sales Tax on Services Act 2012 Section 2(29)
The Khyber Pakhtunkhwa Finance Act 2013 Section 2(36)
A person means-
(a) an individual;
(b) an association of individuals or persons;
(c) a company;
(d) Federal Government;
(e) a Provincial Government;
(f) a local authority or local government; or
(g) a foreign government, a political subdivision of a foreign government, or public international organization
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RESIDENT
The Sales Tax Act, 1990 No Definition
(a) an individual who, in a financial year, has
(i) a place of business, whether whole or part thereof, in (Sindh) in any mode, style or manner; or
(ii) his permanent address, as listed in the individuals national identity card, in (Sindh); or
(iii) a permanent representative to act on his behalf or to provide service on his behalf in (Sindh);
(b) an association of persons or a company which, in a financial year, has
(i) its registered office is in (Sindh); or
(ii) its place of business, whether whole or part thereof, in (Sindh) in any mode, style or manner; or
(iii) a permanent representative to act on its behalf or to provide service on its behalf in (Sindh); or
(iv) the control or management of the association of persons or the company, whether whole or part thereof, situated in
(Sindh) at any time during the financial year;

PLACE OF BUSINESS
The Sales Tax Act, 1990 NO Definition
Place of Business means whenever a person-
(a) owns, rents, shares or in any other manner occupies a space in the (Sindh) from where he carries on an economic activity
whether wholly or partially; or
(b) carries on an economic activity whether wholly or partially through any other person such as an agent, associate, franchise,
branch, office, or otherwise in the (Sindh) but does not include a liaison office;
Handout PDP 2013


TAXABLE SERVICES
The Federal Excise Act, 2005/ Provincial Ordinances Section 3 of the FE Act and PST Ordinances
the FE Act
3(d) services provided in Pakistan including the services originated outside but rendered in Pakistan;
Specified in first schedule to the FE Act
The PST Ordinances
Subject to the provisions of this ordinance there shall be charged, levied and paid a tax on taxable services rendered or
provided in the (Balochistan)
Specified in the Schedule

The Sindh Sales Tax on Services Act 2011 Section 3
The Punjab Sales Tax on Services Act 2012 Section 3
The Khyber Pakhtunkhwa Finance Act 2013 Part 3 chapter 1 Section 19
A taxable service is a service listed in the Second Schedule to this Act

Schedules of Taxable and Services
Services Excisable under the FE Act (First Schedule - TABLE II)

S.No. Description of goods Heading/Sub-
heading Number
Rate of Duty
(1) (2) (3) (4)
1 Advertisement on closed circuit T.V. 9802.3000 16% of the charges
2 Advertisement on cable T.V. network 9802.5000 16% of the charges
2a Advertisements in news papers and periodicals (excluding
Classified advertisements), and on hoarding boards, poles Signs
and sign boards
9802.4000
and
9802.9000

16% of the charges
3 Facilities for travel 98.03
(a) Services provided or rendered in respect of travel by air of
passenger within the
territorial jurisdiction of Pakistan
9803.1000 16% of the charges plus
Rs.20 per ticket
(b)Services provided or rendered in respect of travel by air of
passengers embarking on international journey from Pakistan

(i)Economy and economy plus

(ii)Club, business and first class.
9803.1100

Rs.3,840

Rs.6,840
4 Inland carriage of goods by air 9804.1000 16% of the charges
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5 Shipping agents 9805.1000 (i) Rs.200 per house-bill
of lading in case of
Common carriers Int
Freight ii) 16% of the
charges in other case
6 Telecommunication services 98.12

19.5 % of charges
7 ***]
8 Services provided by banking companies, insurance companies
of the cooperative financing societies, modarabs, musharikas,
leasing companies, foreign exchange dealers, mom-banking
financial institutions, Assets Management Companies and other
persons dealing in any such services.
98.13 16% of the charges
9 ***]
10 ***]
11 Franchise services 9823.0000 10% of the charges
12 ***]
13 Services provided of rendered by stock brokers 9819.1000 16% of the charges
14 Services provided or rendered by port and terminal operators in
relation to imports excluding stevedoring services.
9819.9090 16% of the charges

Services Taxable under the PST Ordinances (Islamabad and Balochistan)
S.No. Description of goods
(1) (2)
1. Services provided or rendered by hotels, marriage halls, lawns, clubs and caterers
(a) Services provided or rendered by hotels
[ ]
(c ) Services provided or rendered by clubs
(d) Services provided or rendered by caterers

2 Advertisement TV and radio excluding advertisements
(i) if sponsored by a Government Agency for health education
(ii) if sponsored by Population Welfare Division relating to Sathi educational promotion campaign funded by USAID; and
(iii) public service message if telecast on television by World Wildlife Funds for Nature of UNICEF
3 Services provided or rendered by persons authorized to transact business on behalf of others
(a) Custom Agents
(b) Ship chandlers
(c) Stevedores
(d) Courier Services

Services Taxable under The KPK Act (Second Schedule)

S.No. Description Classification Rate of Tax
(1) (2) (3) (4)
1. Services provided or rendered by hotels, marriage halls, lawns, clubs and
caterers and services ancillary thereto.
98.01 16%
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2. Services provided or rendered for personal care by beauty parlors, beauty
clinics, slimming clinics
98.10 16%
3. Services provided and rendered by laundries and dry cleaners. 98.11 16%
4. Telecommunication Services 98.12 19.5%
5 Services provided or rendered by persons
authorized to transact business on behalf of others:-
i. Customs agents;
ii. Ship chandlers;
iii. Stevedores; and
iv. Ship management service

98.05

16%
6 Advertisement on T.V and Radio, newspapers, periodicals and Magazines
excluding advertisements.
(i) if sponsored by a Government Agency
(ii) financed out of funds provided under grant in-aid agreement; and
Conveying public service messages.

98.02

16%
7 Advertisement on close Circuit TV or Cable TV 9802.3000 16%
8 Courier services. 98.08 16%
9 Services provided or rendered in respect of insurance to a policy holder by
an insurer, including a re-insurer:-
i. Goods insurance.
ii. Fire insurance
iii. Theft insurance.
iv. Marine insurance. Other insurance

98.13

16%
10 Services provided by banking companies or nonbanking financial
institutions including but not limited to all non-interest based services
provided or rendered against a consideration in form of a fee or
commission or charges.

98.13

16%
11 Services provided or rendered by the Stockbrokers. 98.19 16%

Services Taxable under The Sindh Act (Second Schedule)
With reduced rates as per notification SRB.3-4/8 2013 dated July 01 2013

S.No. Description Tariff Heading Rate of Tax
(1) (2) (3) (4)
1 Telecommunication Services 98.12 19.5%
2 Services provided or rendered by hotels, restaurants, marriage halls,
lawns, clubs and caterers.
98.01 16%
3 Advertisement on TV, radio, CCT, newspaper, cable, poles, billboards,
web or internet
98.02 16%
4 Services provides by stevedores, ship management service, , customs
agents, advertisement agents, ship chandlers, sponsorship services,
business support services
Shipping agents and freight forwarding agents
98.05 16%

Rs.500 per bill of
lading
5 Services provided or rendered by property developers or promoters for
a) Development of purchased or leased land for conversion into
residential or commercial plots.
(b) Construction of residential or commercial units.
9807.0000 Rs.100 per square
yard for land and,
Rs.50 per square
feet for constructed
area.
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6 Courier services 9808.0000 16%
7 Services provided or rendered by persons engaged in contractual
execution of work or furnishing supplies
9809.0000 16%
8 Services provided or rendered for personal care by beauty parlors,
beauty clinics, slimming clinics or centers and others
98.10 10%
9 Services provided or rendered by banking companies, Insurance
companies, cooperative financing societies, modarabas, musharikas,
leasing companies, foreign exchange dealers, non-banking financial
institutions and other persons dealing in any such services.
98.13 16%

10 Architects or town planners
Contractors of buildings (i.e water supply, gas supply, electrical and
mechanical works etc.)
98.14 16%
16%
11 Services provided or rendered by professionals and consultants, etc.
Legal practitioners and consultants
Accountants and auditors.
Management consultants
Software or IT based system development consultants
Tax consultants
98.15

9815.2000
9815.3000
9815.4000
9815.6000
9815.9000

4%
4%
16%
16%
4%
12 Services provided or rendered by specialized agencies
Security agency
Market research agency
98.18
9818.1000
9818.3000

10%
16%
13 Services provided or rendered by specified persons
or businesses
Stockbrokers and commodity brokers
Money exchanger
Surveyors
Outdoor photographers and videographers
Management consultants
Services provided or rendered by port operators, airport operators,
airport ground service providers
and terminal operators
98.19

9819.1000
9819.2000
9819.5000
9819.7000
9819.9300

9819.9090

16%
16%
16%
16%
16%

16%
14 Service provided or rendered by specialized Workshops or undertakings.
Auto workshops, including authorized service stations
Workshops for industrial machinery, constructions
98.20

9820.1000
9820.2000

16%
16%
15 Services provided or rendered in specified fields
Health care centre, gyms or physical fitness center, etc
Body massage center
Pedicure centre
98.21 9821.1000
9821.4000
9821.5000

16%
4%
4%
16 Franchise services 9823.0000 10%
17 Construction services
Management services including fund and assets management services
Airport services
Tracking Services
Security alarm services
Services provided by motels and guest houses
Event Management services including the services by event
photographers, event videographer and the persons related to such
event management
Exhibition services.
98.24 4%
16%

16%
16%
16%
16%
16%
16%

16%
18 Public bonded warehouses

9828.0000

16%
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19 Labour and manpower supply services

9829.0000 16%
20 Services provided in the matter of manufacturing
or processing for others on toll basis
9830.0000 16%
21 Race Club:
(a) Services of entry/admission

(b) Other services
9831.0000 (a) Rs.200
per entry ticket or
entry pass
(b) 16%]

Services Taxable under The Punjab Act (Second Schedule)

S.No. Description Classification Rate of Tax
(1) (2) (3) (4)
1 Services provided by hotels, motels, guest house, marriage halls, clubs and
caterers etc.
9801.0000

16%
2 Advertisement on television and radio, excluding advertisements
(a) sponsored by an agency of the Federal or Provincial
Government for health education;
(b) financed out of funds provided by a Government under grant-in aid
agreement; and
(c) conveying public service message, if telecast on television by the World
Wide Fund for Nature (WWF) or United Nations Childrens Fund (UNICEF).
9802.1000
and
9802.2000
16%
3 Services provided by persons authorized to transact business on behalf of
others
(a) customs agents;
(b) ship chandlers; and
(c) Stevedores.

9805.4000
9805.8000
9805.2000

16%
4 Courier services. 9808.0000 16%
5 Advertisement on a cable television. 9802.5000 16%
6 Telecommunication services 98.12 19.5%
7 Services provided in respect of insurance to a policy holder by an insurer,
including a re-insurer
Goods, fire, theft, marine and other insurance
98.13 16%
8 Services provided by Banking Companies or Non-Banking Financial
Institutions including but not limited to all noninterest based services
provided against a consideration in form or a fee or commission or charge
98.13 16%
9 Services provided by the stock brokers. 9819.1000 16%
10 Services provided by shipping agents 9805.1000 16%
11 Services provided by Restaurants. 9801.2000 16%
12 Advertisements on hoarding boards, pole signs and sign boards and on
closed circuit TV, Websites or internet
9802.0000 16%
13 Franchise Service. 9823.0000 16%
14 Construction services 9824.0000
and
9814.2000
(i) Rs.100 per
square yard for
land
development
and,
(ii)Rs.50 per
square feet for
building
construction.
15 Services provided by property developers and promoters (including allied 9807.0000 16%
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services) respective sub
heading 98.14
16 Services provided by persons engaged in contractual execution of work or
furnishing supplies.
9809.0000 16%
17 Services provided by a foreign exchange dealer or exchange company or
money changer/money exchanger
9813.9000
9819.2000
16%
18 Services provided for personal care by beauty parlors, clinics, sliming clinics
including cosmetic and plastic surgery by such parlors/clinics.
9810.0000
9848.0000
9847.0000
9821.4000
9821.5000
16%
19 Management consultancy services including fund and asset management
services.
9815.4000
9826.0000
16%
20 Services provided by port operators (including airports and dry ports) and
allied services provided at ports and services provided by terminal operators
including services in respect of public bonded warehouses
9838.0000

16%
21 Freight forwarding agents. 9805.3000 Rs.400 per bill
of lading
22 Services provided by software or IT-based system development consultants. 9815.6000 16%
23 Services provided by technical, scientific & engineering consultants. 9815.5000
9819.9400
16%
24 Services provided by other consultants 9815.9000 16%
25 Services provided by tour operators (other than
Hajj and Umrah)
9805.5100 16%
26 Manpower recruitment agents 9805.6000 16%
27 Services provided by security agency. 9818.1000 16%
28 Services provided in respect of mining of minerals, oil & gas including
related surveys and allied activities.

---------------
16%
29 Services provided by advertising agents 9805.7000 16%
30 Services provided by share transfer agents. 9805.9000 16%
31 Services provided by business support services 9805.9200 16%
32 Services provided by property dealers. 9806.2000 16%
33 Services provided by fashion designers. 9834.0000 16%
34 Services provided by architects, town planners and interior decorators. 9814.1000
9814.9000
16%
35 Services provided in respect of rent-a-car 9819.3000 16%
36 Services provided by car/automobile dealers. 9806.3000 16%
37 Services provided in respect of manufacturing or processing on toll or job
basis (against processing charges).
9868.0000 16%

EXEMPT SERVICES
The Federal Excise Act, 2005/ Provincial Ordinances Section 16- 3rd Schedule to the FE Act
Sales Tax Act, 1990
All services provided or rendered except such services as are specified in the First schedule shall be exempt from whole of excise
duty levied under section 3.
Provided that services specified in the third schedule shall be exempt from duty.

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An exempt service means a service which is exempt from tax under Section 10

An Exempt service means a service which is exempt from the tax under Section 12

An exempt service means a service which is exempt from the tax under Section 28

All of above exemption sections are identical as below
10. Exemptions. (1) Notwithstanding the provisions of section 8, the Board, may, with the approval of the Government and
subject to such conditions and restrictions as it may impose, by notification in the official Gazette:
(a) exempt any taxable service from the whole or any part of the tax chargeable under this Act;
(b) exempt any taxable service provided by a specific person or a class of persons from the whole or any part of the tax chargeable
under this Act;
(c) exempt any recipient of services or class of such recipients, including international organizations and institutions, from the
payment of the whole or any part of the tax payable under this Act; and
(d) exempt any person or class of persons from the whole or any part of the tax chargeable under this Act.
(2) The exemption under sub-section (1) may be allowed from any previous date specified in the notification issued under sub-
section (1).

A comparative list of services exempted from FED or Sales tax under the FE Act, PST Ordinances, Sindh Act or Punjab Act.
Presently there is no list of exempt services in KPK Act.
Tariff Heading FE Act /PST Sindh Act Punjab Act
98.01 Services of restaurants and caters with
turnover does not exceeds Rs.3.6 M in a
financial year, and marriage hall and
lawns less 800 square yards -
-Except- air-conditioned, in a premises
of club or hotel, franchise, have more
than one outlets, utility bills exceeds
Rs.40,000 in any month

9801.4000
9801.6000
Services of clubs whose initial fee for
membership does not exceeds

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Rs.30,000 and monthly fee upto
Rs.1,000.
-Refundable security deposits and
contributions for the welfare of club
staff
98.02 - Advertisements financed out
of funds provided under grants-
in-aid agreements.
- Advertisement in newspaper
and periodicals
- Cable TV operators
- Advertisements financed out of funds
provided under grants-in-aid
agreements.
- Advertisement in newspaper and
periodicals
Advertisement sponsored by an
agency of the federal or
provincial government for health
education,
financed out of funds provided
by a government under grant-in-
aid agreement and
conveying public service
message, if telecasted on
television by the World Wide Fund
(WWF) or United Nations
Childrens Fund (UNICEF).

98.03 International Journey by air for
Hajj passengers, diplomats and
supernumerary crew.

98.09 Persons engaged in contractual
execution of work or furnishing of
supplies subject to certain conditions,
including contracts with total value
does not exceeds Rs.50 M in a financial
year and value of services involve upto
Rs.10 M.
-printing of text books
Persons engaged in contractual
execution of work or furnishing of
supplies subject to certain
conditions, including contracts
with total value does not exceeds
Rs.50 M.
-Printing of books
98.10 Services of beauty parlors /clinics less
than Rs.3.6 M in a financial year.
Services of beauty parlors
/clinics less than Rs.3.6 M in a
financial year.
Except- air-conditioned, in a
premises of club or hotel,
franchise, have more than one
outlets, annual utility bills
exceeds Rs.600,000
98.12 Telecom services of
international leased lines and
internet related services.
Telecom services of international
leased lines and internet related
services with a monthly fee upto
Rs.1,500.
Telecom services of international
leased lines and internet related
service.
98.13 Banking companies and non-
banking financial companies in
respect of Hajj and Umarah,
cheque book, musharaka and
modarba financing, utility bills
collection, cheque return, and
amount of mark up or interest
Banking companies and non-banking
financial companies in respect of Hajj
and Umarah, cheque book, musharaka
and modarba financing, utility bills
collection.
and amount of mark up or interest
amount of mark up or interest
98.13 Life, health, crop, live stock and
marine insurance for exports
Life, health, crop and marine insurance
for exports
Life, health, crop and marine
insurance for exports
98.15 Export of services of Software and IT
based system development consultants

98.23 Franchise services payable by
vendors of the auto parts
industry

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98.24 Construction services related to
commercial or industrial projects does
not exceed Rs.50 M with a component
of services less than Rs.10 M.
- Projects of developing and promoting
of land into buildings which pay
reduced rate of tax.
- construction and repair of roads,
ports, airports, railway, terminals,
bridges, Government building ect.
-construction of EPZ, SEZs, diplomatic
buildings and organization exempt from
income tax.
-projects of private residential houses
Construction services related to
commercial or industrial
projects does not exceed Rs.50
M.
- Projects where tax paid by
developers and promoters.
- Government civil works.
-construction of industrial zones,
diplomatic buildings and
organization exempt from income
tax.
-construction under international
tenders
-projects of private residential
houses

TAXABLE SERVICES
The Federal Excise Act, 2005/ Provincial Ordinances Section 3 of the FE Act and PST Ordinances
the FE Act
3(d) services provided in Pakistan including the services originated outside but rendered in Pakistan;
Specified in first schedule to the FE Act
The PST Ordinances
Subject to the provisions of this ordinance there shall be charged, levied and paid a tax on taxable services rendered or
provided in the (Balochistan)
Specified in the Schedule

The Khyber Pakhtunkhwa Finance Act 2013 Part 3 chapter 1 Section 19
A taxable service is a service listed in the Second Schedule to this Act, which is provided:
(a) by a registered person from his registered office or place of business in (Sindh);
(b) in the course of an economic activity, including in the commencement or termination of the activity.
Explanation: This sub-Section deals with services provided by registered persons, regardless of whether those services are
provided to resident persons or non-resident persons.
(2) A service that is not provided by a registered person shall be treated as a taxable service if the service is listed in the Second
Schedule to this Act and:
(a) is provided to a resident person;
(b) by a non-resident person in the course of an economic activity, including in the commencement or termination of the activity.
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Explanation: This sub-Section deals with services provided by non-resident persons to resident persons
whether or not said resident person is an end consumer of such services.
(3) For the purposes of sub-Section (2), where a person has a registered office or place of business in Sindh and another outside
Sindh, the registered office or place of business in Sindh and that outside Sindh shall be treated as separate legal persons.
(4) The Board may, with the approval of the Government and by notification in the official Gazette, prescribe rules for determining
the conditions under which a particular service or class of services will be considered to have been provided by a person from his
registered office or place of business in Sindh.
Rules of Origin of Services and Reverse Charge in Certain Situations

Section 20 of the KPK Act
Section 4 of the Punjab Act

4. Application of principles of origin and reverse charge in certain situations. (1) Where a person is providing taxable services in
a Province other than the Punjab but the recipient of such services is resident of the Punjab or is otherwise availing such services
in the Punjab and has charged tax accordingly, the person providing such services shall pay the amount of tax so charged to the
Government.

(2) Where the recipient of a taxable service is a person registered under the Act, he shall deduct the whole amount of tax in
respect of the service received and pay the same with the Government.

(3) Where a person is providing taxable services in more than one Province or territory in Pakistan including the Punjab, such
person shall be liable to pay tax to the Government to the extent the tax is charged from a person resident in the Punjab or from a
person who is otherwise availing such services in the Punjab.

(4) Where rendering of a taxable service originates from the Punjab but terminates outside Pakistan, such person shall be
required to pay tax on such service to the Government.

(5) Where a taxable service originates from outside Pakistan but is received or terminates in the Punjab, the recipient of such
service shall be liable to pay the tax to the Government.

(6) The persons who are required to pay the tax to the Government in terms of sub-sections (1), (2), (3), (4) and (5) shall be liable
to registration for purposes of this Act and the rules.

(7) All questions or disputes relating to the application of the principle of origin given in this section shall be resolved in terms of
the already recorded understanding between the Federal Government and the Provincial Governments on the implementation of
reformed General Sales Tax provided that pendency of any such question or dispute shall not absolve the concerned person from
his obligation to deposit the tax. 6

(8) The provisions of this section shall apply notwithstanding any other provision of this Act or the rules and the Government may
specify special procedure to regulate the provisions of this section

PERSON LIABLE TO PAY TAX
The Federal Excise Act, 2005/ Provincial Ordinances Section 3(5)(c )
The Sales Tax Act, 1990 Section 3 (3)
Section 3(5) (c ) of the FE Act
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(5) The liability to pay duty shall be
c) in case of services provided or rendered in Pakistan of person providing or rendering of such services, provided where services
are rendered by the person out of Pakistan, the recipient of such services in Pakistan shall be liable to pay Duty
Section 3(3)of the ST Act
(3) The liability to pay the tax shall be,--
(a) in the case of supply of goods, of the person making the supply, and
(3A) Notwithstanding anything contained in clause (a) sub-section (3), the Federal Government may, by a notification in the
official Gazette, specify the goods in respect of which the liability to pay tax shall be of the person receiving the supply.
The Khyber Pakhtunkhwa Finance Act 2013 Section 27
All above provisions are identical / similar
(1) Where a service is taxable by virtue of sub-Section (1) of Section 3, the liability to pay the tax shall be on the registered person
providing the service.
(2) Where a service is taxable by virtue of sub-Section (2) of Section 3, the liability to pay the tax shall be on the person receiving
the service.
(3) Notwithstanding anything contained in sub-Sections (1) and (2), the Board, with the approval of Government may, by a
notification in the official Gazette, specify the services or class of services in respect of which the liability to pay tax shall be on
the person providing the taxable service, or the person receiving the taxable service or any other person.
(4) Nothing contained in sub-Sections (1) and (2) shall prevent the collection of tax from a different person if that person is made
separately or jointly or severally liable for this tax under Section 18.
RATE OF TAXABLE SERVICES
The Federal Excise Act, 2005/ Provincial Ordinances Section 3 of FE Act and PST Ordinances
The Sales Tax Act, 1990

Section 3 FE Act
at the rate of sixteen per cent ad valorem except the goods and services specified in the First Schedule, which shall be charged to
Federal excise duty as, and at the rates, set-forth therein.
Section 3 of PST Ordinances
Subject to the provisions of this Ordinance, there shall be charged, levied and paid a tax known as Sales Tax at the rate of sixteen
per cent of the value of the taxable services rendered or provided in the Province of Balochistan.

The Sindh Sales Tax on Services Act 2011 Section 8 of the Sindh Act
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The Punjab Sales Tax on Services Act 2012 Section 10 of the Punjab Act
The Khyber Pakhtunkhwa Finance Act 2013 Section 26 of the KPK Act
All above provisions are identical/similar

(1) Subject to the provisions of this Act, there shall be charged, levied, collected and paid a tax on the value of a taxable service
at the rate specified in the Second Schedule.

(2) Government may, on the recommendation of the Authority and subject to such conditions and restrictions as the Government
may impose, by notification in the official Gazette, declare that in respect of any taxable service provided by a registered person
or a class of registered persons, the tax shall be charged, levied and collected at such higher, lower, fixed or specific rate as
maybe specified in the said notification.

VALUE OF TAXABLE SERVICES

The Federal Excise Act, 2005/ Provincial Ordinances Section 12(2) of FE Act
the Sales Tax Act, 1990 Section 2(46) of ST Act
Section 12 (2) of FE Act
Where any services are liable to duty under this Act at a rate dependent on the charges therefore, the duty shall be paid on total
amount of charges for the services including the ancillary facilities or utilities, if any, irrespective whether such services have
been rendered or provided on payment of charge or free of charge or on any confessional basis.

Section 2(46) of ST Act
(46) value of supply means:--
(a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which
the supplier receives from the recipient for that supply but excluding the amount of tax:
Provided that
(i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the
open market price of the supply excluding the amount of tax;
(ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration
which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the
amount of tax; and
(b) in case of trade discounts, the discounted price excluding the amount of tax; provided the tax invoice shows the discounted
price and the related tax and the discount allowed is in conformity with the normal business practices;
(c) in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;
(e) in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the
value determined by the Valuation Committee comprising representatives of trade and the
Handout PDP 2013


Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported
goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same
type of imported goods or supplies:
Provided further that where the value at which import or supply is made is higher than the value fixed by the Board, the value of
goods shall, unless otherwise directed by the Board, be the value at which the import or supply is made;

All above provisions are identical/similar
The value of a taxable service is:
(a) the consideration in money including all Federal and Provincial duties and taxes, if any, which the person providing a service
receives from the recipient of the service but excluding the amount of sales tax under this Act:

Provided that
(i) in case the consideration for a service is in kind or is partly in kind and partly in money, the value of the service shall mean the
open market price of the service as determined under Section 6 excluding the amount of sales tax under this Act; and

(ii) in case the person provides the service and the recipient of the service are associated persons and the service is supplied for
no consideration or for a consideration which is lower than the price at which the person provides the service to other persons
who are not associated persons, the value of the service shall mean the price at which the service is provided to such other
persons who are not associated persons excluding the amount of sales tax;
(iii) in case a person provides a service for no consideration or for a consideration is lower than the price at which such a service is
provided by other persons, the value of the service shall mean the open market price for such a service;

Handout PDP 2013


INPUT TAX
The Federal Excise Act, 2005 / Provincial Ordinances
The Sales Tax Act, 1990 Section 2(14)of the ST Act
Input tax, in relation to a registered person, means
(a) tax levied under this Act on supply of goods to the person;
(b) tax levied under this Act on the import of goods by the person;
(c) in relation to goods or services acquired by the person, tax levied under the Federal Excise Act, 2005 in sales tax mode as a
duty of excise on the manufacture or production of the goods, or the rendering or providing of the services;
(d) Provincial sales tax levied on services rendered or provided to the person;
(e) livied under the Sales Tax Act, 1990 as adapted in the State of Azad Jammu and Kashmir, on the supply of goods received by
the person;
Input tax, in relation to a registered person, means,--
(a) tax levied under this Act on the services received by the person;
(b) tax levied under the Sales Tax Act, 1990, on the goods imported by the person;
(c) tax levied under the Sales Tax Act, 1990, on the goods or services received by the person; and
(d) Provincial sales tax or Islamabad Capital Territory sales tax levied on the services received by the person:
Provided that the Board may, by notification in the official Gazette, specify that any or all of the aforesaid tax shall not be treated
as input tax for the purposes of this Act subject to such conditions and limitations as the Board may specify in the notification;
The Punjab Sales Tax on Services Act 2012 (n/a)
The Khyber Pakhtunkhwa Finance Act 2013 - (n/a)

Handout PDP 2013


INPUT ADJUSTMENT / DETERMINATION OF TAX LIABILITY
The Federal Excise Act, 2005 /Provincial Ordinances
Sales Tax Act, 1990 Section 7 of the ST Act
7. Determination of tax liability.-- (1) Subject to the provisions of section 8B, for the purpose of determining his tax liability in
respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be
entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by him
from the output tax that is due from him in respect of that tax period and to make such other adjustments as are specified in
section 9:
Provided that where a registered person did not deduct input tax within the relevant period, he may claim such tax in the return
for any of the six succeeding tax periods.

The Sindh Sales Tax on Services Act 2011 Section 15 Rule 21
The Board may, subject to such conditions and restrictions as it may prescribe and with the approval of the Government, allow
registered persons to claim adjustments or deductions, including refunds arising as a result thereof, in respect of the sale tax
paid on or in respect of any taxable services or class of taxable services provided by them.
The Punjab Sales Tax on Services Act 2012
The Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012.
2. Determination of input tax.- (1) Subject to the provisions of the Act and the rules or notifications issued thereunder, a
registered person who holds a tax invoice for the purchase of goods or services used or consumed in providing of taxable services
in his name, bearing his sales tax registration/NTN, shall be entitled to deduct or adjust input tax paid or payable during the
relevant tax period.

(1) The Authority may, subject to such conditions and restrictions as it may specify, allow registered persons to claim adjustments
or deductions, including refunds arising as a result thereof, in respect of the tax paid under any other law on any account in
respect of any taxable service or goods or class of taxable services or goods provided by them.
(2) For the purposes of sub-Section (1), the Authority may adopt the principles or concepts laid down in such other law in respect
of adjustments, deductions or refunds including zero-rating principle.
Handout PDP 2013


(3) No adjustment or deduction of any tax payable under any other law shall be claimed by any person except in the manner and
to the extent specified in the notification issued under sub-Section (1)

Input Tax Not Allowed
The Federal Excise Act, 2005 /Provincial Ordinances
Sales Tax Act, 1990 Section 8 of the ST Act SRO.490 /2004
8. Tax credit not allowed.-- (1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim
or deduct input tax paid on--
(a) the goods or services used or to be used for any purpose other than for taxable supplies made or to be made by him;
(b) any other goods or services which the Federal Government may, by a notification in the official Gazette, specify;
(c) the goods under sub-section (5) of section 3;
(ca) the goods or services in respect of which sales tax has not been deposited in the Government treasury by the
(caa) purchases, in respect of which a discrepancy is indicated by CREST or input tax of which is not verifiable in the supply chain;
(d) fake invoices; and
(e) purchases made by such registered person, in case he fails to furnish the information required by the Board through a
notification issued under sub-section (5) of section 26.
(2) If a registered person deals in taxable and non-taxable supplies, he can reclaim only such proportion of the input tax as is
attributable to taxable supplies in such manner as may be specified by the Board.
(3) No person other than a registered person shall make any deduction or reclaim input tax in respect of taxable supplies made or
to be made by him.
SRO. 490/2004
Following goods, acquired otherwise than as stock in trade, by a registered person, to be the goods in respect of which input tax
shall not be claimed, namely:-
(a) vehicles falling in chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969);
(b) food, beverages, garments, fabrics, etcetera and consumption on entertainment;
(c) gifts and give-aways;
(d) supply of electricity and gas to residential colonies of registered persons; and
(e) building materials including cement, bricks, paints, varnishes, distempers etc.;
(f) office equipment and machines (excluding electronic fiscal cash registers), furniture, structure, fixture and furnishings
excluding those directly used in taxable activity;
(g) electrical and gas appliances, pipes, fittings excluding those directly used in taxable activity;
Handout PDP 2013


(h) Wires, cables, ordinary electrical fittings and sanitary fittings, excluding those directly used in taxable
(i) crockery, cutlery, utensils etc., excluding those directly used in taxable activity.
Section 73 of the ST Act
73. Certain transactions not admissible.- (1) Notwithstanding anything contained in this Act or any other law for the time being in
force, payment of the amount for a transaction exceeding value of fifty thousand rupees, excluding payment against a utility bill,
shall be made by a crossed cheque drawn on a bank or by crossed bank draft or crossed pay order or any other crossed banking
instrument showing transfer of the amount of the sales tax invoice in favour of the supplier from the business bank account of the
buyer:
Provided that online transfer of payment from the business account of buyer to the business account of supplier as well as
payments through credit card shall be treated as transactions through the banking channel, subject to the condition that such
transactions are verifiable from the bank statements of the respective buyer and the supplier.
(2) The buyer shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-
rating of tax under this Act if payment for the amount is made otherwise than in the manner prescribed in sub-section (1),
provided that payment in case of a transaction on credit is so transferred within one hundred and eighty days of issuance of the
tax invoice.
(3) The amount transferred in terms of this section shall be deposited in the business bank account of the supplier, otherwise the
supplier shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating
of tax under this Act.
Explanation- For the purpose of this section, the term "business bank account" shall mean a bank account utilized by the
registered person for business transactions, declared to the Explanation- For the purpose of this section, the term "business
bank account" shall mean a bank account utilized by the registered person for business transactions, declared to the
Commissioner in whose jurisdiction he is registered through Form STR 1 or change of particulars in registration database.
The Sindh Act (in addition to above) Rule 22
A registered person shall not be entitled to claim input tax adjustment in respect of:
(i) capital goods not exclusively used in providing or rendering of services;
(ii) fixed assets not exclusively used in providing or rendering of services;
(iia) the following goods and services, acquired otherwise than as stock in trade, by a registered person:
(iii) goods and services already in use on which sales tax is not paid, or, where paid, the input adjustment has been taken before
the tax period July, 2011, or where the input related goods and services were purchased or acquired before the tax period July,
2011;
(iv) utilities bills not in the name of registered person unless evidence of consumption is produced in the matter of such claims;
(viii) goods and services used or consumed in a service liable to a tax rate lesser than the 16% of the charges or to a specific rate
of tax not based on value;
(viiia) services liable to a tax rate lesser than 16% of the charges or to a specific rate of tax not based on value when used for
providing or rendering any service; and
(ix) such goods or services as are notified by the SRB to be inadmissible for input tax adjustment.]

APPORTIONMENT OF INPUT TAX
Sales Tax Act, 1990 The Apportionment of Input Tax Rules (ST Rules)
The Sindh Sales Tax on Services Act 2011 (Sindh Rules)
Handout PDP 2013


The Punjab Sales Tax on Services Act 2012 (Punjab Rules)
The Khyber Pakhtunkhwa Finance Act 2013 (N/A)

No credit for non-taxable or exempt services.-

(1) The input tax paid on goods and services used in providing non-taxable or exempt services shall not be admissible.
(2) In case an input is used in providing taxable services and also non-taxable or exempt services, the input tax shall be
apportioned according to the following formula for availing of input tax adjustment/deduction, namely,-

Value of Taxable Supplies
Adjustable Input Tax = Value of Taxable and exempt X Total Input Tax
(or non taxable) Supplies

(3) The adjustments of input tax claimed under this rule by a registered person shall be subject to reconciliation and audit by the
officers of the Authority as and when needed under intimation to the registered person.

REFUND AND CARRY FORWARD OF TAX
Sales Tax Act, 1990 Section 10
(1) If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account
of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the
registered person not later than forty five days of filing of refund claim in such manner and subject to such conditions as the
Board may, by notification in the official Gazette specify:
Provided that in case of excess input tax against supplies other than zero rated or exports, such excess input tax may be carried
forward to the next tax period, along with the input tax as is not adjustable in terms of sub-Section (1) of Section 8B, and shall be
treated as input tax for that period and the Board may, subject to such conditions and restrictions as it may impose, by
notification in the official Gazette, prescribe the procedure for refund of such excess input tax;
Provided further that the Board may, from such date and subject to such conditions and restrictions as it may impose, by
notification in the official Gazette, direct that refund of input tax against exports shall be paid along with duty drawback at the
rates notified in the said notification.
(2) If a registered person is liable to pay any tax, default surcharge or penalty payable under any law administered by the Board,
the refund of input tax shall be made after adjustment of unpaid outstanding amount of tax or, as the case may, default
surcharge and penalty.
(3) Where there is reason to believe that a person has claimed input tax credit or refund which was not admissible to him, the
proceedings against him shall be completed within sixty days. For the purposes of enquiry or audit or investigation regarding
admissibility of the refund claim, the period of sixty days may be extended up to one hundred and twenty days by an officer not
below the rank of an Additional Commissioner Inland Revenue and the Board may, for reasons to be recorded in written, extend
the aforesaid period which shall in no case exceed nine months

The Sindh Sales Tax on Services Act 2011 - Chapter V 23A Notification 30 June 2013
Handout PDP 2013


Processing and sanction of claims for refund by a registered person will apply in following cases:-
(a) the amount of sales tax is erroneously or inadvertently deposited in excess of the amount due; and
(b) the amount deposited by or recovered from the registered person is held not payable under the Act, as result of an order of a
court or an appellate forum.
The Khyber Pakhtunkhwa Finance Act 2013

ASSESSMENT OF TAX
Sales Tax Act, 1990- Section 11
11. Assessment of Tax and recovery of tax not levied or short- levied or erroneously refunded.-- (1) Where a person who is
required to file a tax return fails to file the return for a tax period by the due date or pays an amount which, for some
miscalculation is less than the amount of tax actually payable, an Officer of Inland Revenue shall, after a notice to show cause to
such person, make an order for assessment of tax, including imposition of penalty and default surcharge in accordance with
section 33 and 34:
Provided that where a person required to file a tax return files the return after the due date and pays the amount of tax payable in
accordance with the tax return along with default surcharge and penalty, the notice to show cause and the order of assessment
shall abate.
(2) Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit
or refund which is not admissible under this Act for reasons other than those specified in sub-section (1), an Officer of Inland
Revenue shall, after a notice to show cause to such person, make an order for assessment of tax actually payable by that person
or determine the amount of tax credit or tax refund which he has unlawfully claimed and shall impose a penalty and charge
default surcharge in accordance with section 33 and 34.
Handout PDP 2013


(3) Where by reason of some collusion or a deliberate act any tax or charge has not been levied or made or has been short-levied
or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of refund erroneously made
shall be served with a notice requiring him to show cause for payment of the amount specified in the notice.
(4) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been
short-levied or has been erroneously refunded, the person liable to pay the amount of tax or charge or the amount of refund
erroneously made shall be served with a notice requiring him to show cause for payment of the amount specified in the notice:
Provided that, where a tax or charge has not been levied under this sub-section, the amount of tax shall be recovered as tax
fraction of the value of supply.
(5) No order under this section shall be made by an Officer of Inland Revenue unless a notice to show cause is given within five
years, of the relevant date, to the person in default specifying the grounds on which it is intended to proceed against him and the
officer of Sales Tax shall take into consideration the Provided that order under this section shall be made within one hundred
and twenty days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be
recorded in writing, fix provided that such extended period shall in no case exceed ninety days:
Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute
Resolution proceedings or the time taken through adjournment by the petitioner not exceeding sixty days shall be excluded from
the computation of the period specified in the first proviso.
(6) Notwithstanding anything in sub-section (1), where a registered person fails to file a return, an officer of Inland Revenue not
below the rank of Assistant Commissioner shall subject to such conditions as specified by the Federal Board of Revenue,
determine the minimum tax liability of the registered person.
(7) For the purpose of this section, the expression "relevant date" means--
(a) the time of payment of tax or charge as provided under section 6; and
(b) in a case where tax or charge has been erroneously refunded, the date of its refund.

Section 14 of the FE Act
14. Recovery of unpaid duty or of erroneously refunded duty or arrears of duty, etc.(1) Where any person has not levied or paid
any duty or has short levied or short paid such duty or where any amount of duty has been refunded erroneously, such person
shall be serviced with notice requiring him to show cause for payment of such duty provided that such notice shall be issued
within five years from the relevant date.
(2)The Officer of Inland Revenue, empowered in this behalf, shall after considering the objections of the person served with a
notice to show cause under sub-section (1), determine the amount of duty payable by him and such person shall pay the amount
so determined along with default surcharge and penalty as specified by such officer under the provisions of this Act.

(1) Where on the basis of any information acquired during an audit, inquiry, inspection or otherwise, an officer of the SRB, not
below the rank of Assistant Commissioner SRB is of the opinion that a registered person has not paid the tax due on taxable
Handout PDP 2013


services provided by him or has made short payment, the officer shall make an assessment of sales tax actually payable by that
person and shall impose a penalty and charge default surcharge in accordance with Sections 43 and 44.
(2) No order under sub-Section (1) shall be made by an officer of the SRB unless a notice to show cause is given to the person in
default within five years from the end of the tax period to which the order relates specifying the grounds on which it is intended to
proceed against him and the said officer shall take into consideration the representation made by such person and provide him
with an opportunity of being heard if the person so desires.
(3) Any order under sub-Section (1) shall be made within one hundred and twenty days of issuance of the show cause notice or
within such extended period as the officer of the SRB may, for reasons to be recorded in writing, fix provided that such extended
period shall in no case exceed sixty days.
(4) In computing the period specified in sub-Section (3), any period during which the proceedings are adjourned on account of a
stay order or proceedings under Section 65 or the time taken through adjournment by the person not exceeding thirty days shall
be excluded.
(5) An order passed by an officer of the SRB under sub-Section (1) may be further amended as may be necessary when on the
basis of information acquired during an audit, inquiry, inspection or otherwise, the officer of the SRB is satisfied that:
(i) any sales tax has been under-assessed or assessed at too low a rate; or
(ii) any taxable service provided by the person has escaped assessment.
(6) The Commissioner SRB may amend, or further amend, any order passed under sub-Sections (1) or (5), if he considers that the
order is erroneous or prejudicial to the interest of sales tax.
(7) Sub-Sections (2), (3) and (4) shall be applicable to any order passed under subSections (5) or (6).
(8) Notwithstanding anything contained in this Act, Board may prescribe thresholds, parameters, standards and basis for
assessment of supply value and the assessment of tax.


1) Where on the basis of any information acquired during an audit, inquiry, inspection or otherwise, an officer of the Authority is
of the opinion that a registered person has not paid the tax due on taxable services provided by him or has made short payment,
the officer shall make an assessment of the tax actually payable by that person and shall impose a penalty and charge default
surcharge in accordance with Sections 64 and 65.
(2) No order under sub-Section (1) shall be made unless a notice to show cause is given to the person in default within five years
from the end of the tax period to which the assessment relates specifying the grounds on which it is intended to proceed against
him and the said officer shall take into consideration the representation made by such person and provide him an opportunity of
being heard if the person so desires.
(3) An order under sub-Section (1), shall be made within one hundred and twenty days of issuance of the show cause notice or
within such extended period as the officer may, for reasons to be recorded in writing, fix:
Provided that such extended period shall ordinarily not exceed sixty days.

Definations Section Handout PDP 13 KTBA FE and ST On Services SUH

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General Concepts of Federal Excise and Sales Tax On Services in Pakistan

Handout PDP 2013

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