In Pakistan, construction services are subject to sales tax under the Sales Tax Act, 1990. The tax rates and procedures vary depending on the location of the construction service and the type of service provided.
In Punjab, the Punjab Revenue Authority (PRA) is responsible for the collection of sales tax on construction services. The sales tax rate on construction services in Punjab is 5%.
In Sindh, the Sindh Revenue Board (SRB) is responsible for the collection of sales tax on construction services. The sales tax rate on construction services in Sindh is 13%.
In Khyber Pakhtunkhwa, the Khyber Pakhtunkhwa Revenue Authority (KPRA) is responsible for the collection of sales tax on construction services. The sales tax rate on construction services in KP is 5%.
It is important to note that the sales tax is levied on the value of the construction services provided, which includes the cost of materials, labor, and other expenses incurred during the construction process. The sales tax is charged on the gross amount charged for the service provided, and the service provider is responsible for collecting and remitting the tax to the relevant authority.
For example, if a construction service provider in Sindh provides services worth Rs. 1,000,000, the sales tax payable would be calculated as follows:
Sales Tax = (Value of Construction Services * Sales Tax Rate) / (100% + Sales Tax Rate) Sales Tax = (1,000,000 * 13%) / (100% + 13%) Sales Tax = 130,000 / 1.13 Sales Tax = 115,044
Therefore, the total amount payable by the customer would be Rs. 1,115,044, including Rs. 115,044 in sales tax.
It is important for construction service providers to register for sales tax with the relevant authority and ensure that they are complying with all applicable laws and regulations. Failure to do so may result in penalties and fines.
