Frequently Asked Questions (FAQs)
The answers are only for general guidance purpose and not for the purpose of any
legal reference or citation. A person interested to understand the answers of the
relevant questions more comprehensively is advised to consult the relevant text
of the Punjab Sales Tax on Services Act, 2012 and rules made thereunder for proper
legal understanding of the explanations and clarifications given in the answers.
Q: 1 What is rate of tax?
Ans: Standard rate of sales tax is 16% of the value of a service or services. However,
telecommunication services are liable to sales tax @ 19.5%.
Q: 2 Is there any change in tax rate?
Ans: There is no change in tax rate as yet.
Q: 3 What is procedure for filing of return?
Ans: Sales tax return can be filed either electronically or manually. A complete
procedure for filing of a return is prescribed under the Punjab Sales Tax on Services
(Filing of Returns) Rules, 2012.
Q: 4 How to obtain STRN for PRA?
Ans: Sales tax registration number may be obtained from the Punjab Revenue Authority
either through electronic request or manually. There is no fee or any charge on
obtaining sales tax registration from PRA. A complete procedure for obtaining sales
tax registration alongwith relevant forms is available in the Punjab Sales Tax on
Services (Registration & Deregistration) Rules 2012. In case you are already registered
with the Federal Board of Revenue, you need not to obtain a separate or additional
registration for PRA. The system will automatically prefix the letter “P” with your
previous registration number and include you in the registration data base (population
of registered persons) of PRA. You will get intimation about such change, whereupon
you will be entitled to refer such registration number in all your references, documents,
returns, declarations and statements filed with or sent to PRA.
Q: 5 How many services are included in the Act?
Ans: So far Fifty nine services have been bought under tax net under the Punjab Sales Tax on
Services Act, 2012. They include services relating to hotels, clubs, caterers, advertisements on
T.V & radio including cable TV, customs agents, ship chandlers, stevedores, telecommunication services,
insurance and re-insurance, banking companies, non-banking financial institutions, stock brokers,
shipping agents and courier services. The Second Schedule of the said Act gives full description of
taxable services and has been uploaded on PRA website.
Q: 6 Whether every service provider is liable to be registered?
Ans: Every person who is engaged in providing taxable services is liable to be registered
with PRA. No exemption threshold is applicable in case of services taxable under
the Punjab Sales Tax on Services Act, 2012. The Government of Punjab will however,
consider to prescribe suitable exemption threshold in case of services provided
by hotels in terms of sub-section (3) of section 10 of the said Act.
Q: 7 What is effective date of enforcement of the Punjab Sales Tax Act 2012?
Ans: The effective date of enforcement of the Punjab Sales Tax on Services Act,
2012 is the 1st day of July, 2012.
Q: 8 How and where to make tax payment?
Ans: Sales tax shall be payable through filing of prescribed return in the designated
branches of National Bank of Pakistan. The forms of sales tax return alongwith annexures
and tax payment challan have been prescribed under the Punjab Sales Tax on Services
(Filing of Returns) Rules, 2012. These forms can be downloaded from PRA’s website.
Facilitation desks of Pakistan Revenue Automation Limited (PRAL) are available in
the designated bank branches to guide and assist the taxpayers for filing of their
returns and making payment of their due tax amounts in the bank. The taxpayers may
also file their returns and make tax payments through the notified e-intermediaries
as per list available on PRA’s website.
Q: 9 What is the exemption threshold, if any?
Ans: No exemption threshold is applicable in case of services taxable under the
Punjab Sales Tax on services Act, 2012. The Government of Punjab will however, consider
to prescribe suitable exemption threshold in case of services provided by hotels
in terms of sub-section (3) of section 10 of the said Act. Notification in this
regard shall be issued shortly.
Q: 10 Are there any exempt services?
Ans: Under section 2(38), definition of “service or services” is available, which
says that service means anything which is not goods or providing of which is not
a supply of goods and shall include but not limited to the services listed in the
First Schedule of the Punjab Sales Tax on Services Act, 2012. For clarification
purpose, an explanation has been added to the said definition, which says that a
service shall remain and continue to be treated as service regardless whether or
not rendering thereof involves any use, supply or consumption of any goods either
as an essential or as an incidental aspect of such rendering. The services which
are liable to sales tax are listed in the Second Schedule. The services which are
covered under the First Schedule but are not included in the Second Schedule are
non-taxable services. However, in the Second Schedule there are certain exemptions
within the taxable categories of services. For instance in case of advertisements
on television and radio, the advertisements sponsored by the Federal Government
and Provincial for health and education purposes are exempt. Similarly in case of
insurance, marine insurance for export, life insurance, health insurance and crop
insurance are exempt. For more details, please consult the Second Schedule.
Q: 11 Is sales tax based on self- assessment?
Ans: The sales tax on services system as embodied in the Punjab Sales Tax Services
Act, 2012 and rules made thereunder is based upon the principles of self-assessment,
self-declaration and self-compliance. The PRA does not exercise any physical control
on the economic or business activity of a person providing taxable services. The
taxpayer is himself responsible to issue tax invoices, assess his tax liabilities,
file sales tax returns, make tax payments, keep proper records and accounts of his
taxable transactions and comply with other legal obligations. The only interaction
which may take place between the PRA’s officers/officials and the taxpayers is through
periodical audits, which too are generally conducted after advance intimation to
the concerned registered persons.
Q: 12 Is separate return required to be filed for Provincial sales tax on services?
Ans: The Punjab Sales Tax on Services Act, 2012 and rules made thereunder provide
for a separate provincial level tax system. A separate return is required to be
filed in respect of the services which are liable to tax under the said law. Where
any person is providing taxable services in different provinces, he is required
to obtain separate registration from PRA and file separate returns with PRA in respect
of the services provided by such person in the province of Punjab. The rules issued
under the Punjab Sales Tax on Services Act, 2012 take care of and answer all questions
about the place of supply of a taxable service with reference to the provincial
territory of Punjab. In this regard, provisions of section 4 of the aforesaid Act
may also be seen.
Q: 13 Whether input tax adjustments in cases of cross border services is allowed?
Ans: The input tax paid on the purchase of goods or acquisition of services used
exclusively in rendering of taxable services shall be admissible in terms of the
Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012 read with section 16
of the Punjab Sales Tax on Services Act, 2012. The said rules however, provide for
certain conditions and restrictions on the admissibility of adjustment of input
tax paid on certain goods or services.
Q: 14 What is the mechanism of input tax adjustment in cases of cross border services?
Ans: The input tax adjustment shall be limited to the extent of taxable services.
Where a person is providing both taxable and exempt or non-taxable services, adjustment
shall be confined to the extent proportionate to the quantum of taxable services.
For this purpose, apportionment formula has been incorporated in the Punjab Sales
Tax on Services (Adjustment of Tax) Rules, 2012. The deduction of admissible adjustment
of input tax shall be made at the time of filing of tax return wherein the output
tax liability shall be reduced to the extent of input tax admissible for adjustment
under the aforesaid rules.
Q: 15 Whether input tax adjustment in respect of goods used in provision of services
Ans: The sales tax paid on purchase of goods under the Sales Tax Act, 1990 (VII
of 1990) administered by the Federal Board of Revenue shall be admissible for adjustment
against the amounts of output tax payable on taxable services under the Punjab Sales
Tax on Services Act, subject to the conditions and limitations specified in the
Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012.
Q: 16 What would be the treatment of previous carried forward amount/ refunds available
with the FBR?
Ans: No input tax adjustment shall be admissible to the input tax carried forward
from the period prior to the commencement of the Punjab Sales Tax on Service Act,
Q: 17 Who would collect the arrears in respect of tax periods prior to July 2012?
Ans: Under Article 264 of the Constitution of Pakistan 1973 read with section 4
of the Punjab General Clauses Act, 1956 and section 87 of the Punjab Sales Tax on
Services Act, 2012, the recovery of sales tax arrears on relevant taxable services
shall continue to be effected by the Federal Board of Revenue unless the Government
of Punjab specifically undertakes to realize such arrears at its own level. It is
however, clarified that the Government of Punjab has not so far taken any decision
in this regard and it is understood that recovery of such arrears shall be effected
by the Federal Board of Revenue. Deposit of such arrears shall nevertheless, be
made with the Government of Punjab on the prescribed return on PRA portal.
Q: 18 Who would decide the cases If any adjudication is pending in respect of any
tax period prior to July 2012.
Ans: Under section 87(2) of the Punjab Sales Tax on Services Act, 2012, the pending
adjudications including appeals etc shall be decided by the officers/authorities
previously competent to decide such adjudications etc. These officers/authorities
shall accomplish the outstanding adjudication work as if the Punjab Sales Tax on
Services Act, 2012 has not come into force.
Q: 19 Can PRA conduct audit and investigation in respect of tax periods prior to
Ans: Under section 32 of the Punjab Sales Tax on Services Act, 2012, the standard
or normal period for retention of sales tax records is five years and the competent
PRA officer can call for record maintained either under the said Act or any other
law for official purposes. The provisions for departmental audit are given in section
33 of the aforesaid Act. The Punjab Revenue Authority has issued the Punjab Sales
Tax on Services (Audit) Rules, 2012. Thus, in case of registered persons, where
the Federal Board of Revenue has not commenced proceedings for audit, the officers
of PRA can undertake and conduct audit under section 33 of the Punjab Sales Tax
on Services Act, 2012 even for the period prior to the commencement of the said
Q: 20 What are the contact details of PRA?
Ans: Till PRA establishes its own headquarters, the documentary correspondence with
PRA may be addressed to the Chairperson, Punjab Revenue Authority through the Secretary,
Department of Finance, Government of Punjab, Civil Secretariat, Lahore.
(From 01-12-2012 onwards, PRA headquarters’ office stands shifted to 5-B, Danepur Road, GOR-I, Lahore and future correspondence may therefore, be sent to the new address).
Q: 21 If the status of the taxpayer is “not active”, “blocked”, “suspended” etc
with FBR; what would be its status with PRA?
Ans: No input tax adjustment shall be admissible under the Punjab Sales Tax on Services
law against invoices issued by persons who have been declared non-active or otherwise
blocked in the computer system or suspended by the Federal Board of Revenue. However
in cases where a suspension of any registration has been restored and it is proved
that suspension was unjustified, input tax adjustment shall subject to the prescribed
conditions and restrictions become admissible on post facto basis immediately after
restoration of the suspended (or even cancelled registration). The rules relating
to registration and deregistration, and adjustment of tax take care of such situations.
Q: 22 If a taxpayer does not get itself registered with PRA in the first or second
month of its operation and keeps on filing returns with FBR; what would be the status
of those returns and tax paid with them?
Ans: Under the arrangement agreed with FBR and PRAL, all registered persons who
were registered and paying sales tax under the repealed Punjab Sales Tax Ordinance,
2000 (II of 2000) as amended from time to time shall be included in the list of
registered persons of Punjab Revenue Authority after prefixing the capital letter
“P” with their previous or existing registration numbers. After such migration,
an indication and advice shall be given by the system to every such person who is
attempting to file return with FBR to switch over to PRA portal for filing the return
at PRA Portal. FBR portal will continue to accept their returns in case they have
any taxable activity in any other province/ICT. Their user IDs will remain the same
for the purpose of filing returns on PRA’s website, however they will have to chose
a new password for filing at PRA Portal. However in case of any eventuality involving
payment of sales tax to FBR which was otherwise due to be paid to the Government
of Punjab under the Punjab Sales Tax on Services Act, 2012, PRA shall take up with
FBR for redirection of such tax amounts to the Government of Punjab.
Q: 23 How a taxpayer located in Karachi or elsewhere outside Punjab will deposit
tax with the Punjab Government?
Ans: Designated branches of National Bank of Pakistan are available throughout the
country. As per arrangements made with PRAL, all NBP branches designated to receive
Federal sales tax (collected by FBR) will accept and receive payments of Punjab
sales tax on payment challans prescribed in the rules issued by PRA in this behalf.
More importantly, almost in every major designated NBP bank branches, Taxpayers
Facilitation Desks of PRAL are available where PRAL’s staff is present to assist
the visiting taxpayers for the filling of their returns, making tax payments and
filing of returns. A taxpayer may also approach any e-intermediary or himself file
his electronic return on PRA’s portal. A complete procedure for filing electronic
return is described in the PRA’s Punjab Sales Tax on Services Rules relating to
filing of returns. The tax payments sent to PRA through cross-cheques, bank drafts,
pay orders or similar money-transferring banking instruments and manually filled
returns sent to PRA through courier or post will also be honoured by PRA. The time
taken during such conveyance or travel of these documents etc shall be ignored for
the purpose of determining the tax payment date or return filing date.
Q: 24 How PRA will enforce the provisions of section 4?
Ans: Section 4 of the Punjab Sales Tax on Services Act, 2012 is based upon a universally
recognized and fundamental principle of VAT, i.e, in case of taxable services provided
from one territory and consumed in another territory, the right to tax vests with
the Authority of the territory where service is consumed. VAT is not concerned with
the source or locale of payment of the price of the service. In broader terms, this
principle is also applicable in international trade. Under VAT, exports to other
countries are zero-rated by the exporting country and imports are charged to tax
by the importing country. In countries where VATs are administered at sub-national
levels, reciprocal zero-rating of trade of goods or services between sub-national
units is allowed only if the tax authorities of the concerned sub-national units
agree. In Pakistan, no such agreement exists between the two provinces (Sindh and
Punjab) which are collecting and administering sales tax on services at their own
respective ends. Hence no input tax adjustment has been allowed against output tax
payable under section 4. That being so, the aforesaid section 4 envisages two scenarios
of the situation where a service provider is located outside Punjab but service
consumer is located in Punjab, namely;
Where service provider is registered but service recipient is not registered.
Where both service provider and service recipient are registered.
Where a person is registered for sales tax purposes under the law other than the
Punjab Sales Tax on Services Act, 2012, such person shall send electronic or other
intimation to both PRA and PRAL giving the basic particulars of his existing registration.
PRAL will retrieve his all registration data from the computer system of FBR or
SRB as the case may be, add prefix “P” to his registration number and allow him
access to PRA’s portal where upon he will be in position to file his returns and
make tax payments to the Punjab Government. In this way, answer to the aforesaid
two scenarios is as under:
In cases where both the service provider and the service recipient are registered,
the responsibility to deduct and deposit tax and file return will be with the service
In cases where service recipient is not registered, the responsibility to charge/pay
tax and file return will be with the service provider.
Non-compliance will attract legal action by PRA.
Q: 25 How zero-rating will be allowed by PRA?
Ans: Under the Punjab Sales Tax on Services Act, 2012, no direct zero-rating is
available in respect of any taxable services. Export of taxable service as such
is not liable to tax. However, in view of the provisions of sections 12 and 16,
the export of taxable services outside Pakistan has been allowed the facility of
refund under Chapter IV of the Punjab Sales Tax on Services (Adjustment of Tax)
Rules, 2012. Taxable service shall be treated as having been exported if its delivery
has been consummated for consumption outside Pakistan against receipt of its price
in convertible foreign exchange through declared banking channels and use/supply
or consumption of any goods in the export-related rendering of such service has
been treated as zero-rated under the Sales Tax Act, 1990. PRA will refund only such
amount of tax as has been paid on any service under the Punjab Sales Tax on Services
Act, 2012 used in the providing of the exported service. A complete procedure of
refund has been described in the aforesaid rules.
Q: 26 What is the supplementary invoice and when it is issued?
Ans: The concept of supplementary invoice has been introduced in Chapter-II of the
Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012. Credit and debit notes
are issued where the amount (both value of the service and tax involved therein)
shown on the tax invoice (or on return) is requested to be modified downward. But
there are situations where value of service and amount of tax shown on the invoice
needs to be changed on higher side. To actualize such change, a supplementary invoice
can be issued giving reference to the original or principal invoice. All credit
and debit notes or supplementary invoices are to be counted for in the assessments
on the returns of the tax period in which they are issued. These provisions are
basically meant for facilitating business documentation from sales tax point of
view. The practice of issuing supplementary tax invoice is in vogue in several countries
having VAT systems.
Q: 27 There is no definition of input tax - why?
Ans: Under VAT, the sales tax paid on purchases or acquisitions of inputs is internationally
known as input tax and output tax is the sales tax which is calculated on the sale
or supply of output(s) produced or generated from those inputs. Tax liability is
always equal to output tax minus input tax subject restrictions or limitations prescribed
by the relevant VAT law. Sub-section (2) of section 16 of the Punjab Sales Tax on
Services Act, 2012 authorizes PRA to adopt the principles and concepts laid down
in any other sales tax law for the purpose of adjustments, deductions or refunds
including the principle of zero-rating. Thus, the expression “input tax” like several
expressions of VAT jargon has been used as a general term already widely known to
the public. The concepts of input tax or output tax are also clear from section
10(4) of the Punjab Sales Tax on Service Act, 2012.
Q: 28 How much period is allowed for claiming input tax adjustment?
Ans: Under sub-section (4) of section 10 of the Punjab Sales Tax on Services Act,
2012, credit of input tax can be taken relating to the invoice (issued under the
said Act) not older than six months. This is a general relaxation. However, on the
expiry of six months period in case of any particular input tax invoice, the unclaimed
adjustment or deduction can still be made in the returns of the succeeding four
tax periods under intimation to the concerned Commissioner of PRA. Thus, in case
of any particular invoice accumulated extended period in claiming input tax credit
is ten months, i.e. six months prior to the return in which the credit could be
last taken but was somehow not taken and four months after filing of such return.
In this way, an input tax invoice remains admissible for adjustment or credit for
ten consecutive months but intimation to the Commissioner is must if adjustment
or credit is taken after expiry of six months from the tax period (inclusive) to
which tax invoice relates. This is of course an extraordinary facility to the taxpayers
and will also take care of late-received invoices.
Q: 29 What are the primary duties of the banking companies and NBFIs under the Punjab
Sales Tax on Services Law?
Ans: All services (other than interest-based) provided by banks and NBFIs are liable
to sales tax under the Punjab Sales Tax on Services Act, 2012. The banks or NBFIs
which are already registered with FBR are not required to obtain new registrations
from PRA. Their existing registrations will be automatically revalidated on PRA’s
web-portal by prefixing “P”. Such Banks and NBFIs are required to charge, collect
and pay sales tax to the Punjab Government on the basis of fee, charge or commission
received by them for providing the taxable services. Subject to the limitations
and restrictions imposed on the adjustment of input-tax under the relevant rules
framed by PRA, the banks and NBFIs will be required to deposit tax by 15th and file
return by 18th of every month. PRA has not specified any separate records or registers
for the Banks on NBFIs. They may maintain their records, either manual or electronic,
as per their practices but such record must be in such form as will, as and when
required, enable PRA to ascertain the accuracy and correctness of their assessments
and declarations for the purposes of Punjab Sales tax on Services Act, 2012.
Q: 30 Whether the Banks and NBFIs are mandatorily required to keep Provincial head
Ans: The registrations under the Punjab Sales Tax on Services Law will certainly
be in the name of the banking companies and non-banking financial institutions.
But these registrations will be relevant and effective only for the purpose of Punjab
sales tax. The concept of Provincial head office is primarily meant for representation
purpose. Such offices will be responsible for interacting with PRA on their national
headquarters’ behalf on Punjab sales tax matters. They shall be treated as liaison
offices for the purposes of tax matters covered under the jurisdiction of PRA. It
is however, clarified that designation of Provincial head offices is required only
from those banks and NBFIs whose national headquarters (head offices) are located
outside Punjab. Nomination of Provincial head offices will practically facilitate
smooth relationship between the banks/NBFIs and PRA. Where any bank or NBFIs has
its national headquarter in Punjab, PRA shall treat such headquarter as Provincial
head office for the purposes of Punjab Sales Tax on Services Law.
Q: 31 What is the concept of “territoriality” under VAT on services at sub-national
Ans: The issues of territoriality do not crop up in case of national VAT systems.
However, where a country’s VAT system is partitioned at sub-national levels or where
sub-national units like provinces or sub-national states are collecting VAT in their
respective territories, the issues of territoriality do arise. But such issues are
relevant only is respect of supplies (rendition in case of services) which are made
or exchanged within the national boundaries of a country. Supplies relating to international
trade do not involve such issues. Several VAT experts have examined the territoriality
issues in respect of services which are being rendered by the same service provider
in different geographical boundaries of sub-national units in a nation state. Examples
of such services are usually found in banking, insurance and courier. The accepted
principle for amicable solution of these issues is that where a service is provided
to a customer, client or recipient at a given geographical location (without involving
any element of international trade), tax on such service is countable to a authority
which has jurisdiction to collect tax in that particular geographical location.
In such cases, implications of the service provided for other sub-national units
become irrelevant. The banks (including NBFIs), insurance and courier companies
(service providers) pay VAT on their services on the basis of territoriality, i.e.,
geographical location where service has been provided and charged, invoiced or billed
to fee, commission or service charges. The Punjab Sales Tax on Services Law does
not depart from this well-accepted VAT practice.
Q: 32 Whether withholding tax regime under the Punjab Sales Tax on Services system
is applicable on telephone bills or on invoices issued by banks, NBFIs, courier
or insurance companies?
Ans: The answer is simple “NO” because withholding tax is applicable only in respect
of such taxable services where sales tax invoice proper has been issued. In case
of taxable services, where charges are billed not in the ordinary form of a sales
tax invoice but their bills are, under a fiction of law, declared to be deemed or
treated as sales tax invoices for the purpose of input lax credit, adjustment or
refund, no withholding tax will apply. In nutshell, deemed tax invoices are not
liable to deduction of any withholding tax under the Punjab Sales Tax on Services
Law. Recipient of such services shall pay tax to the concerned service provider
as a part of price of the service (service charges/value of service) as per deemed
sales tax invoice, who will deposit the same with the Punjab Government in the prescribed
manner and mode.
Q: 33 Whether outside telephone calls terminating in Punjab are liable to sales
Ans: Answer to this question lies in the Punjab Sales Tax on Services Rules relating
to specific provisions. The telephone calls originating outside Punjab but terminating
in Punjab are liable to Punjab Sales Tax only to the extent they are charged to
the end consumers in Punjab. Where charges of such calls are partially born by a
consumer in the Punjab, sales tax shall be payable only to that partial extent.
However, if all the charges are born by a person outside Punjab, no tax shall be
payable under the Punjab Sales Tax on Services Law. The telecom companies will likewise
pay tax on international calls subject to sharing of charges only to the extent
of their pecuniary share of charges for transmission and delivery of such calls
in Punjab. Pecuniary share means the charges born by end consumer in Punjab.
EXPLANATION TO FAQ NO.33: When answer to FAQ No.33 was uploaded on PRA’s website/e-portal (on 01-08-2012),
exemption of Punjab sales tax was available on such amounts as are received by the long distance license holders including
Pakistan Telecommunication Company Limited on international incoming calls under agreements with the foreign telecommunication
companies. This exemption was withdrawn by the Punjab government vide Notification No.SO(TAX) 1-1/2013-14 dated 22-05-2013.
Subsequently, through notification No.PRA/Orders.06/2012 dated 10-10-2013, PRA inserted a new sub-rule (3) in rule 26 of the
Punjab Sales Tax on Services (Specific Provisions) Rule, 2012, wherein it was stated that where a registered person is
providing telecom services in respect of international incoming calls and is sharing charges with persons operating in foreign
jurisdictions, the charges received by the registered person shall be treated as tax-inclusive value and tax shall be worked out
and paid by such registered person on the basis of tax fraction formula, that is, the tax shall be calculated by multiplying the
amount of charges with tax rate and dividing the resultant by tax rate plus hundred. Thus, with the withdrawal of exemption as
aforesaid, the charges received by the telecom companies on international incoming calls have out rightly become chargeable to
Punjab sales tax on fraction formula basis regardless of the source of payment or receipt of such charges.
It is therefore, clarified that above referred answer to FAQ No.33 may be read, understood and interpreted as modified accordingly.
Q: 34 What is the place of supply (rendition) of service in case of telephone calls
originating and terminating in Punjab?
Ans: The place of supply (rendition) of service in case of telephone calls which
are both originating and terminating in Punjab is the place where such call is charged
from the user/consumer. If the same telecom company is handling both origination
and termination of such call, it will pay sales tax on whole of the charges received
in respect of a particular such calls. However, in situations where charges of such
calls are shared between two or more telecom companies, they will pay tax according
to their respective share.
Q: 35 Whether sales tax is payable on charges on rooming services of telecommunication
terminating in Punjab?
Ans: Yes: where a telecom company operating in Punjab is contractually or otherwise
providing rooming services of telecommunication in Punjab in respect of connections
hailing from outside Punjab and is charging service charges for such rooming services
within the territory of Punjab, such company shall pay sales tax on such charges
under the Punjab Sales Tax on Services Act, 2012.
Q: 36 What is PRA’s vision about provincial taxation?
Ans: Punjab Revenue Authority is a new institutional creation. History of human civilization has ample testimony that in the statecraft regime, institutions cannot be developed overnight. Institutions are not developed; they grow and mature out of human ingenuity to accelerate economic development and social welfare. The Punjab government has very sincerely and enthusiastically laid down the foundation of PRA. The government has a complete future vision to steer PRA into a sustainable modern and progressive revenue organization. PRA has taken start with the collection and enforcement of sales tax on services. It will undertake collection of other provincial taxes as and when responsibility to that effect is assigned by the Punjab government. It is hoped that under the reformed tax administration environment, PRA will make maximum contribution towards the provincial resource mobilization.
Q: 37 What is PRA’s tax coverage? Does PRA foresee inclusion of more services in future?
Ans: In the Budget 2012-13, the Punjab government has made a new legislation for sales tax on services titled the Punjab Sales Tax on Services Act, 2012. The Punjab Sales Tax Ordinance, 2000 has been repealed. Under the new legislation, the coverage of tax has been for the time being confined to the fourteen services earlier covered under the repealed Ordinance. These services include Hotels, Clubs, Caterers, Advertisements on T.V & Radio Including Cable T.V, Customs Agents, Ship Chandlers, Stevedores, Telecommunication, Insurance and Re-Insurance, Banking Companies, Non-Banking Financial Institutions, Stock Brokers, Shipping Agents and Courier Services. The government will surely bring more services into provincial sales tax net in due course. At present, Sindh Revenue Board is collecting sales tax on more than thirty services. In Punjab, FBR is collecting sales tax on restaurants and Federal excise duty on franchise services and non-classified print media advertisements including hoarding boards, pole signs and sign boards etc. A strong thinking is currently going on in the Punjab government to shift these three services from Federal excise to Punjab sales tax regime. New services will however, not be brought under provincial sales tax net haphazardly; proper research will be done so as to ensure that tax obligations do not hurt consumer choices and remain within the public affordability fourwalls.
Q: 38 What is the revenue collection target during the current year? Is it realistic?
Ans: The Punjab government is expecting that by the end of year, PRA will be able to collect Rs.40 billion including the (yet transferable) sales tax collection made by FBR in the month of July, 2012 relating to the tax period of June, 2012. PRA has not so far examined the micro bases of the annual target assigned to it. It will conduct a detailed exercise in the second quarter of the year to see how much revenue it would be able to reap from the fourteen services by the end of the year. PRA will however, make all-out efforts to achieve the annual target.
Q: 39 Whether a restaurant or marriage/banquet hall is to pay Punjab sales tax on catering services?
Ans: Presently, Punjab Revenue Authority is not collecting sales tax on services provided by restaurants as such. However, if any restaurant is also engaged in providing or otherwise provides catering services, it will pay Punjab sales tax on such services. Here the legal/technical distinction between restaurant services and catering services need to be clearly kept in view. Unlike catering services, restaurant services are meant exclusively for walk-in customers. The banquet halls/marriage halls/lawns are not chargeable to Punjab sales tax. That means their “rental” is not taxable. However, as per inclusionary definition of caterer given in rule 29 of the Punjab Sales Tax on Services (Definitions) Rules, 2012, the indoor/inside or outdoor/outside catering services by or of such halls/lawns are chargeable to Punjab sales tax.
Q: 40 Whether Punjab sales tax withheld by registered persons on advertisement services is adjustable?
1. This is an important question because several instances have been noticed by the Punjab Revenue Authority wherein several registered persons including telecom companies, insurance companies and banks etc are withholding sales tax amounts on advertisements run on their behalf by television and radio media etc but are not depositing it with the Punjab government. They are rather including the withheld amount in their input tax thereby adjusting it against their overall output liability, which means they are counting the same amount as input tax and as output tax simultaneously in the same return resulting into no payment to the Punjab government. The Authority has examined the legal propriety of this practice and has found that it is not consistent with the law as explained hereinafter.
2. Under rule 6 of the Punjab Sale Tax on Service (Withholding) Rules, 2012, the recipients of advertisement services who are registered for Federal sales tax on goods or for the Punjab sales tax on services, are required to deduct the whole amount of Punjab sales tax chargeable on advertisement services. Under rule 12, all amounts of the Punjab sales tax on services deducted or withheld under the said rules are required to be deposited with the Punjab government. Under rule 13, the application of the provisions of other rules and notifications issued under the Punjab Sales Tax on Services Act, 2012 has been restricted only to the extent these provisions are not inconsistent with the provisions of the Punjab Sales Tax on Services (Withholding) Rules, 2012, which means the provisions of the Punjab Sale Tax on Services (Adjustment of Tax) Rules, 2012 which regulate input tax adjustment of Punjab sales tax, do not apply to the liability dischargeable under the withholding tax scheme.
3. Within the domain of Punjab sales tax, input tax adjustment is generally admissible under section 10 (4) of the Punjab Sales Tax on Services Act, 2012. The provisions of section 16 do not apply to cases where adjustment of Punjab sales tax against Punjab sales tax is involved. Under section 10 (4), the Punjab Revenue Authority can disallow or restrict input tax adjustment (deduction) in case of Punjab sales tax on any service or services. Under rule 6 readwith rule 12 of the Punjab Sales Tax on Service (Withholding) Rules, 2012, Punjab sales tax on advertisement services is liable to be withheld and deposited as such with the Punjab government without any deduction or adjustment, whatsoever, by the recipients of such services, who are registered for the Federal sales tax on goods or for the Punjab sales tax on services. These two rules ipso facto and inherently impose restriction on the adjustment of the withheld amounts of Punjab sales tax on advertisement services.
4. The above interpretation clearly shows that the registered persons under reference are not discharging their Punjab sales tax (withholding tax) liability properly on the acquisition of advertisement services. They are not entitled to adjust the withheld amount under reference against any other liability of the Punjab sales tax. Thus, it is clear that the past liability of payment of withheld amounts of sales tax in respect of advertisements stands undischarged by several registered persons under reference. All such persons are therefore, individually and severally advised to immediately pay these amounts to PRA with effect from 01-07-2012. In future, they may either pay such amounts in advance of filing of their return or alternatively, pay them as a part of output tax on their monthly return without deducting the same as input tax in the same return or in any future return.
Q: 41 Whether or not the rentals received by telecom companies from internet service providers for providing space on their cell sites (towers) for installation of boosters or similar equipments for providing broadband internet services, will attract Punjab sales tax?
1. Under rule 106 of the Punjab Sales Tax on Services (Definitions) Rules, 2012, telecommunication services include the transfer or assignment of the right to use capacity for such transmission, emission or reception and provision of access to a global or local information network. As provided under clause (38) of section 2 of the Punjab Sales Tax on Services Act, 2012, a service remains and continues to be a service regardless whether or not rendering thereof involves any use, supply or consumption of any goods either as essential or incidental aspect of such rendering.
2. Besides, when any specific service falling in a class of services is not specified by description under a separate sub-heading of a classification, it falls, depending upon its technical categorization or sub-categorization, either in the residual sub-classification (others) of the relevant sub-heading or in the last (grand) residual sub-classification of the main classification. The service of renting any space on towers by the telecom companies for installation of boosters will be classified accordingly and will, attract sales tax in terms of rule 25 of the Punjab Sales Tax on Services (Specific Provisions) Rules, 2012.
3. Moreover, under clause (b) of section 6 (1) of the Punjab Sales Tax on Services Act, 2012, supply of moveable property by way of lease, license or similar arrangement is covered under the concept of economic activity and any transaction of supplying anything other than goods during the course of economic activity is service.
4. Mere renting out of any space on towers owned by telecom companies, even though used for installation of boosters meant for providing broadband internet services (which are currently exempt from Punjab sales tax) does not entitle such telecom-related renting service to any exemption from Punjab sales tax whether with reference to broadband internet services or otherwise. The telecom companies, who charge rental amounts, shall therefore, be required to charge, collect and pay sales tax against the tax invoices issued to the broadband service providers. The principle that unless zero rated, exempt supplies/services by and large remain input tax-paid, has a universal application under VAT or VAT-type taxation.
Q: 42 Is there any change in tax
rate after inclusion of restaurants, franchise and advertisements in Punjab
sales tax on services regime?
Ans: There is no change in rate of tax in case of restaurant services and
advertisements. However, the rate of Punjab sales tax on franchise services is
16% instead of the 10% rate of Federal excise duty which was being collected by
FBR prior to 06-10-2012. Since franchise amounts are paid out of turnover of a
business, the amount of franchise fee chargeable to Punjab sales tax is
deductable from the turnover of a business chargeable to Punjab sales tax. Thus
double taxation has been avoided within the system of Punjab sales tax on
services. For more details, Chapter XII of the Punjab Sales Tax on Services
(Specific Provisions) Rules, 2012 inserted vide PRA’s notification
No.PRA/Order.06/2012 (13) dated 08-11-2012 may be consulted.
Q: 43 Is there any change in
valuation of franchise services for the purposes of Punjab sales tax?
Ans: There is as such no change in the valuation base of franchise services for
the purpose of calculating the amount of Punjab sales tax at the rate of 16%.
Valuation mechanism in case of franchise services is described in rule 57 of the
Punjab Sales Tax on Services (Specific Provisions) Rules, 2012 as amended. The
gist of this rule is that where a formal franchise agreement exists, the amount
of franchise stated in the agreement shall be used to calculate the amount of
Punjab sales tax unless the amount of franchise actually paid exceeds the agreed
amount, in which case the actually paid higher amount shall be made basis for
assessment of Punjab sales tax. However, where no agreement exists, the net
sales of the franchisee during the relevant period shall be taken as value for
the levy of Punjab sales tax. In all situations, the gross amount of franchise
whether paid under agreement or otherwise shall be taken. No input tax
adjustment is admissible against or for the amount of Punjab sales tax payable
or paid on franchise services.
Q: 44 Are the receipts from bakery
sales located within a restaurant subject to Punjab sales tax?
Ans: Like clubs, several restaurants are rendering bakeries or otherwise selling
bakery products in their restaurant business premises. These products are sold
not only as “take away” or “outdoor sales” but also sometimes, generally or
regularly served within the restaurants. It is certainly an option of the
customer to consume the eatables/drinkables on the restaurant premises or take
the same away for subsequent consumption. Under the Punjab Sales Tax on Services
Act, 2012, the words “services provided by restaurants” have been used. The
expression “services” includes all types of services whether they involve
serving of eatables and drinkables within the restaurant premises or sale of
eatables and drinkables from the premises of restaurant in any other manner,
mode or style. Such being the legal position, Punjab sales tax is leviable on
the sales of bakery products just like other taxable services provided by the
restaurants (or by clubs as usual). In this regard, the explanation given in
clause (38) of section 2 of the Punjab Sales Tax on Services Act, 2012 where the
expression “services” or services” has been defined for the purpose of Punjab
sales tax, may be seen.
Q: 45 What will be the consequence
if any taxpayer wrongly or otherwise deposits Punjab sales tax with FBR or any
other tax organization in the country?
Ans: Payment or deposit of Punjab sales tax with any other tax organization
including FBR amounts to non-payment of such tax with the Punjab
government/Punjab Revenue Authority. Any non-payment of due Punjab sales tax
will attract determination and recovery of tax liability besides penal action
under the Punjab Sales Tax on Services law.
Q: 46 Are newly registered
taxpayers with PRA, liable to file forthcoming returns or for tax period(s)
prior to registration as well?
Ans: Punjab sales tax is leviable on specified services with effect from a
certain date. Except restaurant services, franchise services and certain
categories of advertisements on which Punjab sales tax has been levied with
effect from 06-10-2012, Punjab sales tax is chargeable on all other taxable
services with effect from 01-07-2012. The persons whether registered or not who
are providing taxable services are required to pay sales tax and file return
with effect from the date on which a service has been subjected to Punjab sales
tax. However, the persons who have yet not obtained registrations from PRA or
who have applied for registration with PRA but their registration numbers have
not been generated by the system, may make payments by preparing CPRs with the
help of PRAL’s officials/ staff posted in the designated branches of National
Bank of Pakistan. PRA’s system will accept all such payments and will
automatically post these payments in the registration/payment data base of a
person after his regular registration.
Q: 47 How an advertising agency can
comply with Punjab sales tax on services?
Ans: Advertising agencies are required to be registered/e-enrolled with PRA as
provider of taxable services if they are providing such services in or in
respect of the province of Punjab. The registered recipients of taxable
advertisement services are required to withhold the whole tax amount and deposit
the same with the Punjab government to the extent these services are consumed in
Punjab. Thus, advertising agencies are not required to act as withholding agent
in such scenario. They will pay tax only in respect of the services which they
provide to the unregistered recipients in Punjab subject to apportionment of tax
amounts as and if needed.
Q: 48 Whether an advertising agency
will be required to charge sales tax on agency commission, whereupon the media
channel has already charged the sales tax?
Ans: Sales tax is payable by the advertising agency on the charges received by
it. If these charges are restricted only to agency commission as an established
business practice, the sales tax will be payable on commission amount only
provided such commission amount has not been already taxed by another service
provider like T.V or Radio channels etc while invoicing their services directly
to the recipient of the service and if all transactions of the advertising
agency are based upon receiving commission amounts already so taxed, the
advertising agency shall only file a nil payment return. Unless specifically
ordained in law, double taxation is generally avoided under VAT.
Q: 49 If advertisement service
provider is registered out of Punjab and the service recipient is registered
under the Punjab Sales Tax on Services Act, 2012, whether still the recipient
will be withholding agent, if yes, to whom he will pay withheld sales tax.
Ans: Subject to interprovincial apportionment of tax entitlement, a person
registered with PRA receiving taxable advertisement services from a person
registered with SRB or FBR will withhold the tax amount for deposit to the
Q: 50 If advertising agency is
neither headquartered in Sindh nor in Punjab, rather it is registered in KPK or
Baluchistan or ICT, then to which authority, it will pay sales tax on the
Ans: Subnational sales taxation on services operates on the principle of
economic jurisdiction, which means geographical jurisdiction is not a bar for a
person to charge and pay sales tax to a tax agency of any specific geographical
jurisdiction. Any person who holds NTN can get e-enrolled with PRA regardless of
the physical location of his business or head office. Thus, if a person has his
business office outside Punjab but he is providing taxable services in or in
respect of Punjab, he may get himself e-enrolled with PRA and pay tax to the
Punjab government to the extent of proportional entitlement of the province of
Punjab. Here it needs to be emphasized that advertisement services consumed
throughout Pakistan are subject to Punjab sales tax to the extent of
proportional entitlement of the Punjab province as worked out on the basis of
territory-wise turnover of the withholding agent and where such turnover data is
not available, according to the population of the relevant territory.
Q: 51 Whether or not shop boards
prepared and supplied or installed by advertising companies are liable to Punjab
sales tax on services?
Ans: The expression “advertisement” has been inclusively defined under rule 6 of
the Punjab Sales Tax on Services (Definitions) Rules, 2012. According to this
rule, advertisement includes any notice, circular, wrapper, document, hoarding,
billboards or any other audio or visual representation made either by means of
paint, colouration, sound, light, smoke or gas or otherwise. Similarly, under
rule 7 of the said rules, advertising agency has been defined as any person
engaged in providing any service or services connected with the making,
preparation, display, demonstration or exhibition of advertisement in any manner
and includes an advertising consultant by whatever name called.
2. In terms of notification No.SO(TAX)1-9/2011 dated 06-10-2012, advertisements
on hoarding boards, pole signs and sign boards are chargeable to Punjab sales
tax. Under section 2(38) of the Punjab Sales Tax on Services Act, 2012, an
explanation has been added which says that a service shall remain and continue
to be treated as service regardless whether or not rendering thereof involves
any use, supply or consumption of any goods either as an essential or as an
incidental aspect of such rendering.
3. Thus, the shop boards containing particulars of the business names or
representation of other/allied business activities for the purpose of
identification/publicity of the business activity at a specific premises, fall
in the category of advertisements chargeable to Punjab sales tax.
4. If a recipient of the advertisement services is a person registered either
with FBR or with PRA, he is required to withhold the whole amount of Punjab
sales tax and deposit the same with the Punjab government without any deduction
or adjustment as laid down in the Punjab Sales Tax on Services (Withholding)
Rules, 2012, otherwise the service provider will collect and pay the tax.
Q: 52 Who will be responsible to pay Punjab sales tax on franchise services where franchiser is based in Punjab?
Ans: The issue of chargeability of Punjab sales tax in respect of
Punjab-based franchisers providing franchise services outside the province of Punjab has been examined. Rules 55 and 56 of Chapter XII of the Punjab Sales Tax on Services (Specific Provisions) Rules, 2012 deal with the situations where either franchisee is located in Punjab or where both the franchiser and franchisee are located in Punjab. These rules are not concerned with the situations where franchisers are located in Punjab but their franchises are located out of Punjab. Such situations shall be governed under section 11 (1) readwith section 3 (1) and section 4 (4) of the Punjab Sales Tax on Services Act, 2012. Under these provisions where a taxable service is provided (origination) by a person from his office or place of business in the Punjab in the course of an economic activity including the commencement and termination of the activity, the liability to pay tax is upon the person providing such service regardless of whether or not such service is provided to a person resident in Punjab or not. More importantly, the provisions of the Punjab Sales Tax on Services (Specific Provisions) Rules, 2012 are relevant only to the situations covered thereunder and tax treatment of the situations not covered under these rules is to be done within the general statutory framework of the Punjab Sales Tax on Services Act, 2012. Thus the franchisers who are providing franchise services from their offices or places of business located in Punjab to franchisees located outside Punjab are required to pay Punjab sales tax on such services. Their franchisees may take input adjustment against the output tax of other tax jurisdictions as per practice already in vogue. This is, however, subject to the reciprocity of the provisions of section 4 of the said Act amongst concerned revenue authorities, in which case tax will be apportioned between the relevant tax jurisdictions.
Q: 53 Whether the location of oil/gas exploration/production equipments and personnel at a site in Punjab for rendering of services shall constitute a place of business and carrying on of an economic activity as defined in section 6 of the Punjab Sales Tax on Services Act, 2012?
Ans: Under section 3(1) read with section 11(1) of the Punjab Sales Tax on services Act, 2012, if a person has an office or place of business in Punjab where from he is managing providing of services whether in Punjab or outside, the invoices issued for such services from the Punjab office will be counted towards the payment of Punjab sales tax. Provided that if a service is rendered by such person in a tax jurisdiction outside Punjab and the relevant law of that jurisdiction has provisions parallel to section 4 of the Punjab Sales Tax on Services Act, 2012 and the service is taxable over there, tax will go to that jurisdiction, otherwise tax will be paid to the Punjab government. However, if the office of a person is located elsewhere but he is providing service (s) in Punjab as a service company, he will have to pay Punjab sales tax.
Whether the services such as drilling of oil wells, cementation, wire line services and fracturing etc provided by oil service companies would fall within the scope of services mentioned against item No.28 in the Second Schedule to the Punjab Sales Tax on Services Act, 2012?
The Exploration & Production (E&P) companies (having concession rights) which are doing mining, exploration or recovery or allied work by their own self are not as such liable to Punjab sales tax. However, the service companies (including contractors providing services to E&P or service companies in the aforesaid fields) who are providing services (all types of services) to E&P companies (on charges basis) in respect of mining, exploration or recovery (or related activities including survey) are required to pay Punjab sales tax. Tax is payable only on the basis of service charges agreed with E&P companies (in case of mining, the expression mining companies may be used if need be). All types of services relating or relevant to the aforesaid fields are covered under the said serial number 28.
Whether any service without PCT heading and without amending the First Schedule to Punjab Sales Tax on Services Act, 2012 and allotment of PCT heading by amending the First Schedule of the Customs Act, 1969 by the Federal government could be brought in the ambit of Punjab sales tax?
Under section 2(38) of the Punjab Sales Tax on Services Act, 2012, the description and classification of services in the First Schedule is minimum. It is not necessary or essential for any service to be first mentioned in the First Schedule before bringing it to Punjab sales tax net by mentioning it in the Second Schedule. Thus, there is no need for tarrification of such services in Pakistan Customs Tariff. Description, categorization, classification or taxability of services operate independent of Pakistan Customs Tariff. The text (including its correct interpretation), description of the Punjab Sales Tax on Services Act, 2012 and rules made thereunder will prevail so far as the domain or scope of Punjab sales tax is concerned.
Whether the taxable services provided by corporate sector businesses will attract withholding tax under Punjab sales tax on services system?
Under the Punjab Sales Tax on Services (Withholding) Rules, 2012 as amended vide notification No.PRA/Orders.06/2012 dated 28-05-2013, withholding tax is applicable on advertisement services across the board. In case of services relating to telecommunication, banking, courier and insurance, no withholding tax is applicable. Similarly, the services (other than advertisement services) provided by corporate sector businesses registered under Punjab Sales Tax on Services Act, 2012 are also not subject to withholding tax. For withholding tax in case of advertisement services, the distinction of corporate and non-corporate businesses is not applicable or relevant. Tax on advertisement services is to be withheld by the withholding agents under all circumstances. However, a person providing advertisement services to an unregistered person or to a person who is not a specified withholding agent, shall charge, collect and pay Punjab sales tax at his own level.
What is the scope and nature of taxable services with reference to
E&P companies provided in respect of mining of mineral, oil and gas including related surveys and allied activities
mentioned at entry no 28 of the 2nd Schedule to Punjab Sales Tax on Services Act, 2012?
The E&P companies which are doing mining, exploration or
recovery or allied work by their own self are not liable to Punjab sales tax. However, the service companies (including
contractors providing services to E&P or service companies in the aforesaid fields) who are giving services (all types of
service including drilling, cementation, wireline services, fracturing, geological and geophysical survey, technical
analysis of geological and geophysical data, data consulting and soil testing etc ) to E&P companies (on charges basis) in
respect of mining, exploration or recovery (or related activities including survey) are required to pay Punjab sales tax.
Tax is payable only on the basis of service charges agreed with E&P companies (in case of mining, the expression mining
companies may be used if need be).
Whether Punjab-based liaison offices are covered under the concept of place of business under the Punjab Sales Tax on Services Law?
Ans: The answer is simply “yes”. The term “place of business” is defined under section 2(30) of the Punjab Sales Tax on Services Act, 2012. This definition has two alternative scenarios, or in other words, two components (a) and (b). Component (a) covers a space which is occupied by a person either being owner, rentier or sharer to carry on an economic activity whether wholly or partially. Component (b) covers a situation wherein economic activity is carried on by a person through “any other person” such as an agent, associate or franchise or branch office or otherwise. In the component (b), liaison office is excluded because in case of liaison office an economic activity is generally carried on directly by the person himself (including his employees or representatives). Thus, the liaison office is covered under the component (a) of the definition of place of business under the said section 2(30) and its exclusion from component (b) appears to be an intentional legislative decision. The Punjab-based liaison offices of the businesses with head offices outside Punjab (which includes outside Pakistan) are therefore, required to obtain enrollment/registration with PRA and pay Punjab sales tax on the taxable services provided or cause to be provided by them in or in respect of the province of Punjab. However, in cases where head offices (including country liaison offices) of such businesses directly obtain enrolment/registration from PRA, their liaison offices will not need any separate or extra enrolment/ registration.
Note:It is clarified for the purpose of removal of any doubt that the above answer has no bearing on the operation of section 4 of the aforesaid Act.
What are the Punjab sales tax payment obligations of travel agents and tour operators who are not receiving any commission from airline companies for the purpose of issuing and selling air-tickets?
The services provided by tour operators and travel agents including all their allied services or facilities (other than Hajj and Umrah) are liable to Punjab sales tax @16%. It has been reported by several travel agents/tour operators that most of the airlines have discontinued payment of fixed commission on the sale of air-tickets and have instead allowed them to charge commission and other margins (constituting “value added” at the hands of tour operators/travel agents). These commissions and other margins are received, collected and retained by tour operators/travel agents by way of charges of their services of selling air-tickets (as a part of their own business turnover). Under the Punjab Sales Tax on Services Law, it is mandatory for the tour operators/travel agents to obtain registration/enrollment from PRA. Punjab sales tax is payable by such tour operators/travel agents on the amount of commissions and other margins as aforesaid received either from the airlines or directly from the customers. Besides, the service charges received by such tour operators/travel agents for other (allied) services or facilities provided by them to their customers/clients are also liable to Punjab sales tax at the aforesaid rate. Facility of input tax adjustment is however, admissible to them in terms of Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012. The definitions of air-travel agent, tour operator service and travel agency service are available respectively under rules 11, 105 and 108 of the Punjab Sales Tax on Services (Definitions) Rules, 2012 readwith rule 4A thereof as available on PRA’s website.
Whether or not courier companies and road passenger transport businesses, providing services of transmission, transportation or conveyance of goods, articles or cargo (besides or other than time-sensitive documents) are required to charge, collect and pay Punjab sales tax on such services?
Under rule 37 of the Punjab Sales Tax on Services (Definitions) Rules, 2012, “courier services” have been defined as the transmission, transportation or conveyance, whether door-to-door or not of time-sensitive documents, goods, articles or cargo whether or not utilizing the services of a person either directly or indirectly to accompany such documents, goods, articles or cargo and include speed post, express cargo service and similar fast services of transmission, transportation and conveyance of documents, goods, articles or cargo. This definition consists of the following components:
(i) There is always involved an element of transmission, transportation or conveyance;
(ii) Items involved may be either
(a) time-sensitive documents;
(c) articles or
(d ) cargo;
(iii) The delivery may be either door-to-door or otherwise;
(iv) It is not relevant whether or not a person accompanies the carriage of such items;
(v) Speed post, express cargo service and similar fast services of transmission, transportation and conveyance are also included in the definition.
Thus, the definition not only expressly covers the transmission, transportation or conveyance of time-sensitive documents but also of goods, articles or cargo including speed post, express cargo service and similar fast services undertaken by the courier companies. The courier services provided for the aforesaid purposes may utilize any mean, mode or form of transportation, conveyance or transmission. Internationally, multi-model transportation is one of the main features of courier services. Courier services also cover both mail and non-mail parcels, packages or similar products and even unpacked or unpackaged goods. Delivery may be over-night or otherwise time-scheduled (whether expressly or impliedly). They may involve expedited or non-expedited deliveries and just-in-time or otherwise time-unscheduled deliveries. Therefore, all such services provided by courier companies, airlines, post offices, railways, road passenger or cargo transport businesses are taxable services,
regardless of the nature or description of an item, transmitted, transported or conveyed and of the nature, mode, form, type, character or manner of transport. The recent amendment brought by Punjab Finance Act, 2014, in the description of Entry No. 4 of the Second Schedule to Punjab Sales Tax on Services Act, 2012 has further rationalized and broadened the scope of tax and specifically included cargo services by road passenger transportation businesses as well in the list of taxable services. Mode of transport is irrelevant in this regard as well. Such businesses may adopt any mode, manner or type of transportation, whether through passenger conveyance or otherwise for providing cargo services. Tax is leviable on provision of such cargo services as such without exception.
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