Sindh govt clarifies tax imposed on ride-hailing services is 5% not 13% [Update]

According to a recent statement issued by the Sindh Revenue Board (SBR) to clarify the confusion about tax imposed on ride-hailing companies, the board maintained the stance that these services would have to pay a reduced rate of Sindh sales tax of 5%, not 13% as previously reported by various local media outlets.

Last week, some leading local news media outlets referring to an online document comprised of proposals for Sindh Finance Bill, reported that Sindh govt is going to impose 13% tax on online cab services like Uber and Careem in its move to collect an additional Rs. 25 billion in the next fiscal year 2019-20. However, now SRB has slammed news on 13% tax and claimed that a reduced sales tax rate of five percent has been imposed on the total component i.e. the cab aggregators and cab drivers, as reported by Dawn News.

SRB noted that there is no truth in the propaganda by ride-hailing companies that the tax rate will be 13% and have an effect of 26 percent. The board claims that both components i.e. ride-hailing companies and their drivers will have to pay a reduced rate of 5% which is still a tax advantage for service providers. Because the vehicle renting services such as metro cab, white cab, etc, were already paying a sales tax of 10 percent. According to a statement by SRB;

“Although the services of cab aggregators and cab drivers related thereto compete with such rent-a-car services or radio cab services, the former remained outside the tax net on one pretext or the other causing discriminatory tax disadvantage to their competitors.”

Update: An anonymous source working with a ride-hailing company told TechJuice that Sindh govt had proposed 13% sales tax on ride-hailing companies as we quoted from the Finance Bill 2019-20 for Province of Sindh in our story but after extensive pressure from media organizations and social media, Sindh govt decided to reduce the tax and portrayed it like it was never 13%.

Moreover, the board was of the view that the products and services of every manufacturer and service provider create employment opportunities for the general public. But this doesn’t mean they don’t have to pay taxes. The online ride-hailing companies have provided a source of earning for thousands of Pakistanis and they also need to play their part in revenue collection.