Session on Sales tax on services and the contours of inter-provincial harmony held

03rd February 2016, Lahore: ACCA (the Association of Chartered Certified Accountants) and Lahore Chamber of Commerce and Industry held a session on Sales tax on services and the contours of inter-provincial harmony.

The session talked about equilibrium with the indirect taxes on the supply of goods. It is the more patchwork contours of Pakistan’s post the 18^th amendment to the constitution that now presents us with shifting tectonic jurisdictions on sales tax on services.

Each province barring Baluchistan, have now passed their own statute for sales tax on services. First out of the starting blocks was Sindh with their Sindh Sales Tax on Services Act 2011, followed closely by the Punjab Sales Tax on Services Act 2012 and on the outside lane theKP Finance Act 2013.

Speaking at the ACCA/CIPE/LCCI event Sales tax on services and inter-provincial harmonisationChas Roy-Chowdhury, ACCA’s head of global taxation said “Europe has had to deal with cross border VAT complexities over many years. The single currency market and open border trade policies allow for the free movement of goods and services, but the principle of input tax at the port of import applies. Each EU member has their own rate from 15 to 27%. Wherever the purchase occurs in the supply chain that is where the VAT is paid.”

Chas further said that sound principles must be followed. “A supply of services is the supply of anything that is not a good. The general rule for determining the place of supply is the place where the supplier of the services is established (or "belongs"), such as an office where the service is supplied, the supplier's permanent address, or where the supplier usually resides. VAT is then charged at the rate applicable in the member state where the place of supply of the services is located and is collected by that member state.

This general rule for the place of supply of services (the place where the supplier is established) is subject to several exceptions. Most of the exceptions switch the place of supply to the place where the services are received.”

Rather it may have better planned for the federal government to draft a framework within which provinces could tax services. Without cross provincial consensus on supply of services confusion may lead to double taxation, excessive administration burden on both the businesses and tax authorities.

Also speaking at the event Hammad Siddiqui, Deputy Country Director CIPE said “the chambers of commerce across the country represent a network through which traders and business can be educated to adopt legitimate sales tax practices. Tax is a cost of doing business like any other operational cost. The most businesses can do to reduce their tax burden is through proper tax planning which more often is connected with professional  financial management.”

The event was hosted by the Lahore Chamber of Commerce and Industry with whom ACCA Pakistan has a long standing MOU that encourages the sharing of knowledge. The President LCCI stated, “This event was most helpful for people interested in understanding sales tax at a provincial and federal level. It also provided an excellent opportunity for like-minded professionals to enter into a dialogue regarding concerns about the impact on sales tax on their businesses and ways to improve their tax planning.”

“These collaborative events are part of ACCA’s public value agenda. ACCA Pakistan believes in fair taxation and has always advocated tax compliance. ACCA members support businesses through proper accounting for sales tax, ensuring timely submissions of tax returns and other compliance templates and lastly helping businesses navigate current and future taxation laws and planning for the future,” said Arif Masud Mirza, Regional Head of Policy.