Sales Tax Instructions

Sales Tax Instructions, 2009
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SALES TAX RULING/ INSTRUCTION No.63/2002
C. No. 4(80)STR/98 DATED 12 TH OCTOBER, 2002
SUBJECT:- APPLICATION OF GST THRESHOLD FOR SERVICE
PROVIDERS (HOTELS).
A question has been raised whether or not exemption or turnover threshold
prescribed under section 3A and serial No. 42 of the Sixth Schedule to the Sales Tax Act,
1990 is applicable on hotels rendering services chargeable to sales tax under the
respective Provincial Sales Tax Ordinances (all 2000). Board has examined this
question.
2. Scope of sales tax leviable on services is specified under section 3 of the
said Ordinances. Sub-sections (2) and (3) of section 3 say that the tax under these
Ordinances shall be charged and levied on the specified services in the same manner and
at the same time as if it were a sales tax leviable under sections 3, 3A and 3AA of the
Sales Tax Act, 1990 and all the provisions of the said Act and rules, notifications and
orders and instructions issued thereunder shall, mutatis mutandis, apply to the collection
and payment of tax under the Ordinances so far as they relate to the matters covered
under items (a) to (f) of sub-section (3) of section 3 of the aforesaid Ordinances. Item (f)
covers all other allied and ancillary matters.
3. Board is of the view that most of the service providers especially
hotels/hotels-cum-restaurants combine the services of manufacture and retail. Therefore,
in view of the exclusion of manufacturers from the definition of retailer given under
section 2(28) of the Sales Tax Act, 1990, such hotels shall be treated as manufacturers
and threshold and annual turnover limits prescribed for the manufacturer under the said
Act i.e. section 3A and serial No. 42 of the Sixth Schedule of the Sales Tax Act, 1990
shall apply on them. Thus, hotels with annual turnover less than Rs. 0.5 million are not
required to charge provincial sales tax while hotels with annual turnover from Rs. 0.5
million to Rs. 2.5 million are required to pay turnover tax @ 2% without charging any
sales tax on hotel receipts/invoices issued to their clients. However, hotels with turnover
more than Rs. 2.5 million per annum are required to maintain records as prescribed under
the Sales Tax Act, 1990 and issue invoices/receipts charging sales tax @ 15%.
4. All the Collectors of Sales Tax are advised to inform the Chambers of
Commerce & Industry and concerned associations and take necessary action accordingly.
[Issued by the CBR, Islamabad under the signature of Mr. Iftikhar Qutab, Chief (Sales
Tax-III) addressed to all the Collectors.]
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