Introduction

Government of Khyber Pakhtunkhwa (Finance Department) had issued a Notification No. BO(Res-III)FD/2-2/2019-20/Vol-I dated August 05, 2020 to make amendment in Second Schedule of the Khyber Pakhtunkhwa Finance Act No. XXI of 2013.

 

Commentary

Through the aforesaid Notification, following further amendments as stated (in Red) have been made in the Second Schedule of the Khyber Pakhtunkhwa Finance Act No. XXI of 2013 whereby rate od sales tax has been reduced on various services as explained below.

 

S# Description of Services Current Rate of Tax Revised Rate of Tax
1 Services provided by hotels, restaurants etc.

 

Exemptions and reduced tax rates:

 

“(iii) Services provided or rendered by non-corporate local chains of hotels (including guest houses and lodges etc.) and restaurants shall be charged to tax at the rate of Eight Percent (8%) without input tax adjustment; provided that where in any case of such restaurant, the Restaurant Invoice Management System (RIMS) is installed and working properly on regular basis, the rate of tax shall be further reduced to Five Percent (5%) without any input tax adjustment:

 

Provided that in case of traditional type restaurants usually called as dhabha or conventional hut-type or similar other road or street side non-air-conditioned restaurants, usually serving limited range of pre-cooked or pre-prepared food items with informal seating environment (located or operating anywhere in the tariff areas of the Province), the tax shall be charged and paid at the rate of One Percent (1%)”; and

 

(iv) In case of traditional accommodation facilities like sarrayae or inns or open air overnight bed provisioning services generally located or available around or in the vicinity or railway stations, bus or wagon stands (stations), the rate of tax shall be “one percent (1%)” without any input tax adjustment if the charges for overnight stay do not exceed rupees three hundred per bed.

    
2 Services provided or rendered by beauty parlors, beauty clinics, health care centers, cosmetic or plastic surgery centers/clinics, health clubs, gyms (including yoga centers with or without yoga teaching classes’ systems or arrangements) physical fitness centers, massage centers, pedicure/manicure centers, swimming pools and similar other establishments, undertaking, enterprises or entities, etc. Eight percent (8%) Without any input tax adjustment Five percent (5%) Without any input tax adjustment
3 “Reduced Rate of Tax: Services provided or rendered by medium sized stand-alone or other launderers and dry cleaners including carpets or sofa set or similar furniture items cleaners or washers shall be chargeable to tax at the rate of two percent (2%) without any input tax adjustment.” 8% without any input tax adjustment 2% without any input tax adjustment
5 “Reduced Rate of Tax:

(ii) Business support services and labor or manpower supply services shall be charged to tax at the rate of five percent (5%) without any input tax adjustment.”

 Fifteen Percent (15%) Five percent (5%) without any input tax adjustment
8 “Reduced Rate of Tax:

“All services covered in this entry except services (whole range) of authorized automobile (all categories of automobiles) dealers shall be charged to tax at the rate of two percent (2%) without any input tax adjustment.”

 Five percent (5%) without any input tax adjustment Two percent (2%) without any input tax adjustment.
9   Five percent (5%) without any input tax adjustment in all cases except industrial workshops and authorized automobile dealers’ workshops where the tax shall be charged at the rate of Ten percent (10%) without input tax adjustment “(i) Five percent (5%) without any input tax adjustment in case of industrial workshops,

(ii) Two percent (2%) without any input tax adjustment in case of all other categories or types of workshops,

(iii) Two percent (2%) without any input tax adjustment in case of stand-alone car wash (car wash station) services; and

(iv) Ten percent (10%) without any input tax adjustment in case of authorized automobile dealers’ workshops (whole range of their workshop services including car wash etc.).”
13 Services provided by persons engaged in contractual execution or performance of works (Please refer to the Act for detailed Description of Services) Fifteen Percent (15%) Five percent (5%) without any input tax adjustment
15 Digital or IT-based services in whatever form or manner or under whatever arrangement  (Please refer to the Act for detailed Description of Services) Five Percent (5%) Two percent (2%) without any input tax adjustment
17 Airport Services (Please refer to the Act for detailed Description of Services) Fifteen Percent (15%) Ten percent (10%) without any input tax adjustment
18 Dry port Services (Please refer to the Act for detailed Description of Services) Fifteen Percent (15%) Ten percent (10%) without any input tax adjustment
20 Cinematographic production, photographic services, recording services and telecasting or broadcasting services (Please refer to the Act for detailed Description of Services) Ten percent (10%) without any input tax adjustment Two percent (2%) without any input tax adjustment
21 Event Management Services Fifteen Percent (15%) Eight percent (8%) without any input tax adjustment
22 Exhibition, convention or carnival services and allied services including renting of purpose specific property or space for such events. Fifteen Percent (15%) Eight percent (8%) without any input tax adjustment
25 Cable TV Operators Five Percent (5%) Two percent (2%) without any input tax adjustment
27 Services of fashion designers not engaged in designing, manufacturing, and selling their own products or goods through their regular paid employees Fifteen Percent (15%) Ten percent (10%) without any input tax adjustment
28 Container Terminal Services

(Please refer to the Act for detailed Description of Services)

 Fifteen Percent (15%) Ten percent (10%) without any input tax adjustment
30 Services provided by laboratories

(Please refer to the Act for detailed Description of Services)

 Fifteen Percent (15%) Five percent (5%) without any input tax adjustment
32 Valuation or assessment services

(Please refer to the Act for detailed Description of Services)

 Fifteen Percent (15%) Five percent (5%) without any input tax adjustment
33 Services provided for inland carriage of goods by air, railways or otherwise against freight or carriage charges.

 

“Provided that the following services of Pakistan Railways whether falling under this serial no. or elsewhere in this schedule, shall be liable to tax at the rate of two percent (2%) without any input tax adjustment:

(i)                 Courier services in relation to the speedy, fast, quick or urgent mail, parcel or cargo services provided; and,

(ii)               Services provided for inland carriage of goods against freight or carriage charges.”;

 Fifteen Percent (15%) two percent (2%) without any input tax adjustment

 

(for services only as stated in proviso)
34 Services provided or rendered by under writers including sponsorship services. Fifteen Percent (15%) Two percent (2%) without any input tax adjustment
35 Services provided or rendered by indenters and similar intermediaries. Fifteen Percent (15%) Two percent (2%) without any input tax adjustment
36 Services provided or rendered by auctioneers. Fifteen Percent (15%) Two percent (2%) without any input tax adjustment
39 Services provided or rendered in respect of quality assurance, quality control, quality inspection (including pre-inspection), quality verification or certification including verification or certification of quality or standards under ISO regime. Fifteen Percent (15%) Two percent (2%) without any input tax adjustment
42 Online Market Place (OMP) including online platform or portal services by whatever name called (other than ride hailing or ride hail services) Five percent (5%) without input tax adjustment Two percent (2%) without any input tax adjustment
44 Services relating to or in respect of the installation, erection, commissioning or other permanent structure-affixed/linked/tied placement (whether) full or in part) of any industrial, mechanical or electric plant, machinery or equipment (excluding installation of domestic equipment etc for residential use).

(Please refer to the Act for detailed Description of Services)

 Fifteen Percent (15%) Two percent (2%) without any input tax adjustment

notification-of-amendments-in-second-schedule-of-kp-finance-act-2020