FBR reduces sales tax on earnings through websites

Following the latest tax reforms, the government has now decided to reduce sales tax for earnings made via online websites.

A 6% tax will now be implemented on online websites that generate revenue, granted that the owner of that website provides all the sales data to the Federal Board Revenue’s Computerized system through the required software. Under FBR rules, the standard rate of sales tax is 17% but online sales can get avail a lower 6% rate if they register with the FBR system and provide the necessary data.

As per the new rules devised by FBR, any online business or online sales made through a website which is hosted with a registered domain name will be treated in the same way as the sales that are made through a point of sales on any regular physical outlet and is accordingly covered under this rule, provided that the complete sales data is transmitted to the FBR’s database through a prescribed integration software with the same particulars as specified with invoice provided to the customer with particulars.

Websites that generate revenue through online earning will now be registered with FBR’s computerized system and are now required to provide the following details:

• Domain name
• Domain name provider
• Name of service provider managing the website
• Addresses of supply centers and warehouses

Furthermore, social media portals may also come under this category if they generate revenue via these online platforms.

“Sales made through social media portals shall also be treated as covered under this sub-rule if the same are recorded through a point of sale and relevant provisions are complied with,” FBR added.

Good news for the leather and textile sector is that FBR has allowed these industries to integrate with FBR’s online system through which these sectors will be able to avail the benefits of reduced sales tax rates under SRO 1125(1)/2011.

With the introduction of these promising tax reforms, the PTI government will be hoping that more and more business come under the tax-net and register themselves as legitimate businesses with proper payment of the required taxes. Let’s hope that more companies and businesses comply with these new tax reforms.