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Karachi, Pakistan, July, 2024 – The Sindh Revenue Board (SRB) has announced the imposition of a 15% sales tax on services provided by call centers for the tax year 2024-25.

This move follows recent updates to the working tariff for call centers as per the amendments introduced through the provincial Finance Act, 2024.

According to the SRB, the standard sales tax rate for call center services is now set at 15%. However, businesses in the call center sector have the option to avail of a reduced sales tax rate of 3%, subject to specific conditions outlined by the SRB.

To benefit from the reduced rate, registered call centers must electronically submit an election or option in Form "L" as per Rule 42J of the Sindh Sales Tax on Services Rules, 2011. Additionally, businesses opting for this reduced rate must note that input tax credit or adjustment will not be available under this scheme.

The SRB also introduced an exemption from sales tax for certain call center services. Services exported and delivered by registered call centers to clients outside Pakistan will be exempt from sales tax. To qualify for this exemption, the value of the export must be received in foreign exchange through banking channels into the business bank accounts of the registered call center exporting the services. Furthermore, the transaction must be reported to the State Bank of Pakistan in accordance with the procedures prescribed by the State Bank.

This new tax regime aims to streamline the taxation process for call centers and ensure compliance with the provincial tax regulations. The imposition of the standard rate and the provision for a reduced rate reflect the SRB’s approach to balance revenue generation with support for the service sector.

The introduction of the 15% sales tax and the conditional reduced rate of 3% is expected to impact the operational costs for call centers. Businesses in the sector will need to adapt to these changes by updating their financial and compliance practices accordingly.

The changes in sales tax regulations will require call centers to closely monitor their tax obligations and reporting processes. The option to elect for a reduced rate could offer some relief, but the absence of input tax credit might affect cost structures for many companies.

For export-oriented call centers, the exemption provides a significant advantage, potentially enhancing competitiveness in international markets. Adhering to the prescribed procedures for foreign exchange and reporting will be crucial for leveraging this exemption.

The SRB’s new tax measures for call centers mark a notable shift in the taxation landscape for the sector, aiming to enhance regulatory compliance while providing avenues for tax relief under specific conditions.

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Posted by Veronica Silva Cusi, news correspondent
Source: https://pkrevenue.com

Date Posted: Monday, July 29, 2024