Sindh Finance Act 2024 – 2025

The Sindh Finance Bill 2024, passed by the Provincial Assembly of Sindh on June 28, 2024, has been enacted as the Sindh Finance Act 2024.

This blog post summarizes the key amendments introduced by the Act, effective from July 1, 2024.

Our comments are based on our interpretation of the new legislation.

Standard Tax Rate Increase:

The standard Sindh Sales Tax (SST) rate has been increased from 13% to 15% to harmonize with other provincial laws. This step, while increasing the cost of doing business, aims to eliminate tax arbitrage caused by differing rates among provinces, which previously led to the flight of business and tax revenue from one jurisdiction to another.

Newly Introduced Taxable Services:

• Farmhouses
• Hospitals & Clinics
• Education Services (excluding those provided to children with special needs and adult literacy programs)
• Medical Practitioners & Consultants
• Pet Care Services
• Intra-city Transportation of Goods

Changes in SST Rates, Conditional Exemptions, and Reduced Rates

Description	Conditional Exemptions / Applicable Rates	Eligibility to Reduce Rate or Exemption
Restaurant services	8%	In case payment against made through debit cards, credit cards, mobile wallets or QR scanning (without input tax adjustment)
	15%	If the service provider opts for input tax adjustments, subject to filing an option and getting SRB approval
Medical practitioners & Consultants	Exempt	Where the provision of services involves gross amount of fees/charges/consultation not exceeding to Rs. 3000/- per patient
	3%	Chargeable to SST if exceeds the above limit (without input tax adjustment)
Educational Services	Exempt	Where fee / charges limit to Rs. 500,000/- to each student per annum
	3%	Chargeable to SST if exceeds the above limit (without input tax adjustment)
Hospitals and Clinics	Exempt	Services in respect of provision of room / bed to indoor patients and day care patients where per day charges does not exceed Rs.25,000/-
	3%	Chargeable to SST if the amount exceeds the above limit in relation to service of room / bed to indoor patients and day care patients. (without input tax adjustment)

Reimbursable Expenses

Expenses of reimbursable nature like salaries and allowances, will now be included in the value of taxable service. This change may prompt taxpayers to knock the doors of superior courts, as previous judgments on the essence of services have favored taxpayers.

Economic Activity

The scope of economic activity has been enhanced to include the indirect relationship between an employee and an employer. Consequently, employers will now be responsible for charging SST if an employee is deputed or outsourced for a client’s work.

Record Keeping The record-keeping timeframe has been reduced from 10 years to 6 years from the end of the respective financial year for tax periods starting July 1, 2025. This change aims to ease the burden on taxpayers registered with multiple tax authorities by providing a uniform timeframe.

Furnishing of Records

SRB can now ask for the records related to services provided by persons registered with other provincial tax authorities as well. Previously, taxpayers could resist providing such records due to blanket exclusions upheld by Appellate Forums

Assessment Orders

Assessment Orders under Sections 23(2) and 47(1) will now be passed within 5 years for tax periods after June 2025. This change aligns the assessment phase across different jurisdictions, removing previous hurdles in variation of time limit faced by taxpayers.

Automatic Stay SRB now allows an automatic stay for taxpayers by depositing only 10% of the tax due, replacing the existing 25%, in cases where an appeal is pending before the Commissioner Appeals SRB. This aligns SRB’s provisions with Punjab and Federal tax laws.

Changes in the Definition of Services

Business Support Services: Broadened the scope to include the term ……‘marketing’.

• Car or Automobile Dealer: Now includes ‘other motor vehicles’.

• Cosmetic and Plastic Surgery: Clarified to include ‘procedures’.

• Hotel: Scope expanded to include ‘huts’, ‘resorts’, ‘lodges’, and ‘facilities’, and ……also includes ‘events’.

• Programme: Now includes any program transmission through internet, radio, ……television, cinema, or theatre.

• Renting of Immovable Property: Excludes land or premises used for outdoor ……games and sports.

• Rent-a-car and Automobile Rental Service: Scope expanded by deleting the ……word ‘passenger’.

• Sports and Games Center: Now includes ‘indoor’ and ‘outdoor’ sports centers.

• Surveyor: Scope enhanced to include specialized surveys for mineral ……exploration.

The Sindh Finance Act 2024-2025 introduces substantial changes aimed at enhancing the efficiency and uniformity of tax regulations in the province.

Staying informed about these amendments is crucial for compliance and strategic financial planning.

For any questions or queries, please consult with Befiler’s tax professionals to navigate these changes effectively.