PBC seeks clarity on court’s sales tax verdict

KARACHI: The Pakistan Business Council (PBC) has asked the federal and provincial revenue boards to clarify the ambiguity in sales tax portions, and raised concerns regarding the Sindh Revenue Board (SRB) sending notices to its member companies.

PBS Chief Executive Ehsan Malik wrote a letter to Finance Minister Shaukat Tarin and Sindh Chief Minister Murad Ali Shah to seek their attention towards a judgement passed by the Sindh High Court (SHC), Karachi on September 6, 2021.

The letter said “SHC has held that distribution arrangement, whereby distributers buy goods from the manufacturers from onwards supply down the supply chain against payment of sales tax under Sales Tax Act 1990 (the Act), in fact depict rendering of taxable services under Sindh Sales tax on Services Act 2011 (SSTSA) if such manufacturers retain certain quality of other controls over the supply chain down the line.” On the basis of this decision, the letter said the Sindh Revenue Board (SRB) has now started issuing notices to its member companies seeking details of their distributors.

Presently, PBC member companies and their registered distributors were paying sales tax on sale of taxable goods under the Federal Sales Tax law. The decision of the SHC has created ambiguity for the member companies and their distributors. Since the SHC decision, it was not clear which portion of the sales tax due needed to be deposited with which tax authority – the Federal Board of Revenue or the SRB, it noted.

The PBC requested the FBR and the SRB to mutually decide which portion of the distributors’ margin was due to which tax authority so the members could fulfil their tax duties. The current uncertainty regarding the sharing of sales tax was impacting the ease of doing business, the letter said. PBC is a business policy advocacy platform, with 88 of the largest private-sector businesses and conglomerates, including multinationals as its members. The founding objectives of the PBC include working with the governments in the centre and provinces to improve the general business environment of the country.