In the new Financial Bill 2020, the Government of Punjab has created a new category in the sales tax net for ride-hailing services. Previously, ride-hailing services such as Uber and Careem were being treated as rent-a-car services and were paying 16% taxes as such. Now, with the introduction of the new category, that tax rate is reduced to just 4% under the Punjab Sales Tax On Services act of 2012.
Similarly, many other services have seen their tax rate reduced from 16% to 5%, and in a few cases to zero for the upcoming fiscal year. This is being done in to boost economic activity in the province following the coronavirus lockdown and the difficult situation that followed for the economy. The Government of Punjab believes that these measure will help increase its revenue stream in the long run as more economic activity equals more taxes overall, despite the lower tax rates.
The Bill further states that, “The rates have also been reduced for the sectors hit by the pandemic such as hotels, caterers, marriage halls/lawns, catering and allied services, IT, tour operators, gyms, property dealers, rent-a-car, cable TV operators, treatment of textile and leather services, commission agents of agri-produce, auditing, accounting and tax consultancy services, photography and parking services.”
Following the COVID-19 pandemic, Pakistan’s economy has suffered huge losses due to businesses being shut down and is in recession for the first time in decades. The new Finance Bill intends alleviate some of the hardships faced by businesses in the country and bring the economy back to a stable position.
