Frequently Asked Questions (FAQs)
Q1: Who is authorized to administer the Sales Tax on Services in Province?
Ans: " Khyber Pakhtunkhwa Revenue Authority (KPRA)" is authorized to administer the Sales Tax on Services in Khyber Pakhtunkhwa.
Q2: What is Sales Tax on Service? Is it an indirect Tax?
Ans: Sales Tax on Services is an indirect levy. This tax is applicable to services specified in Second Schedule to the Khyber Pakhtunkhwa Finance Act 2013.
Q3: What is the rate of Sales Tax on Services?
Ans: Standard rate of Sales Tax on Services is 15% except telecommunication whereon it is 19.5% on the "value of taxable services". There are other services on which reduced rate of sales tax is applicable.
Q4: Who is liable to pay Sales Tax on Services to the Government?
Ans: The person who provides taxable service is responsible for collection and payment the Sales Tax on Services to the Government.
Q5: How do you describe the expression, "person" appearing in the definitions of taxable service?
Ans: The expression refers to any natural, legal or juristic person and includes individuals, AOP, companies, Federal Government, Provincial Government, Local Government, Foreign Government etc.
Q6: What is the procedure for registration?
Ans: A prospective taxable service provider seeking registration should file an application in a prescribed form within fourteen days from the date of notification of the taxable service. The Authority is required to issue the Registration Certificate within three working days.
Q7: Would non-profit organizations and association of persons like clubs, provincial bodies, trade associations engaged in carrying out economic activity be required to register for sales tax purposes?
Ans: Yes. All such organizations or associations will qualify as persons engaged in economic activities unless specifically exempted.
Q8: Whether a service provider can make payment of Sales Tax on Services and file return before the grant of registration by the proper officer?
Ans: Yes. A service provider can pay tax and file return immediately after applying for registration. Q9: Would a service provided by a Foreign Service Provider in Khyber Pakhtunkhwa be liable for payment of tax under the Act?
Ans: Yes, tax is payable on all taxable services rendered in Khyber Pakhtunkhwa, whether rendered/provided by a person resident in Khyber Pakhtunkhwa or otherwise.
Q10: Is there any penal provision for non-registration?
Ans: Yes. Such person shall be liable to pay a penalty of ten thousand rupees or five per cent of the amount of the tax he would have been liable to pay had he been registered, whichever is higher. In the case of non-compliance of compulsory registration, the minimum penalty shall be ten thousand rupees: If such person who is required to get himself registered under this Act, fails to get registered within ninety days of providing taxable services, he shall be further liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to one year, or with fine which may extend to the amount of the tax he would have been liable to pay had he been registered, or with both. (Section 64, Serial No 1 of KP Finance Act 2013)
Q11: How and where to pay Sales Tax on Services?
Ans: The Sales Tax on Services is required to be paid through PSID created on the website. The list of such National Bank Branches is placed on the website of KPRA. Head of account "B-02386 – Khyber Pakhtunkhwa Sales Tax on Services" has been specified for payment of sales tax on services.
Q12: Whether sales tax on service deposited by the registered person in non-designated bank will amount to non-payment of tax?
Ans: Yes. For payment of sales tax on services, specific National Bank branches will receive it. If sales tax on services is deposited in a branch of Bank other than National Bank, it also amounts to non-payment of tax.
Q13: What is the date of payment of Sales Tax on Services? Is it the date on which the cheque for the same is deposited / tendered in the designated Bank or the date on which the amount is credited?
Ans: The date on which tax is credited shall be the date of payment. If the cheque bounces, it would mean as if the tax has not been paid and the necessary penal consequences would follow.
Q14: Can the Authority or authorized Officer ask for more information than what Taxpayer is submitting to it in the return or a tax invoice?
Ans: Yes, if required. The Authority or authorized officer can always ask for additional information.
Q15: What are the precautions to be taken by the Taxpayer while depositing the Sales Tax on Services?
Ans: The following measures should be taken by the Taxpayer at the time of making payment.
i. Service Tax should be paid within the time limit laid down in this regard. ii. It should be deposited in the specified branches of the National Bank designated for this purpose. iii. In case of delay in making payment of sales tax on services in time, the default surcharge and penalty are also required to be paid.
Q16: Has the Khyber Pakhtunkhwa Sales Tax on Services ordinance 2000 been replaced?
Ans: After enactment of the Khyber Pakhtunkhwa Finance Act, 2013, the KP Sales Tax on Services Ordinance, 2000 stand repealed.
Q17: Is the sales tax charged on services adjustable against sales tax paid on the acquisition of goods and services?
Ans: Section 26(4) and 32 of the KP Finance Act, 2013 provides for input tax adjustment, where such goods and services are used in providing taxable services, subject to restrictions provided or adjustment mechanism.
Q18: Are there any zero rated services?
Ans: No zero rating is provided on the services.
Q19: Are there any exempt services?
Ans: All services outside of Second Schedule are exempt.
Q20: Services often include charges for reimbursement of expenses incurred on behalf of the recipient (like custom duties and other charges paid by customs agent, out of pocket expenses incurred on behalf of the clients by professionals, cost of materials paid by an advertising agent, cost of airline ticket paid by a travel agent etc.), would these be subject to sales tax?
Ans: The expense payable to others acting as an agent of the principal would not generally form subject matter of tax. The details are provided in the rules.
Q21: Is the Sales Tax based on self-assessment?
Ans: Yes. Sales tax on services originates with the principal of self-assessment and self-compliance.
Q22 Will a separate return required to be filled for the Provincial Sales tax purposes?
Ans: Yes. Separate return for the sales tax on services is filed electronically.
Q23: How often a Sales Tax audit be conducted?
Ans: Ordinarily, once in a year.
Q24 What is appellate procedure?
Ans: Same as in the Federal Fiscal Laws. Appellate forums: i. Collector (Appeals); ii. Appellate Tribunal; and iii. High Court, in case question of law is involved. Administrative forums: i. Alternate Dispute Resolution Committee
Q25: Where we can find list of authorized bank branches?
Ans: The list is displayed on website of KPRA.
Q26: Have the rules under the above Act been promulgated? If yes, from where can we get a copy?
Ans: Rules have been promulgated and are available on website of KP Revenue Authority.
Q27 Are Modarabas, Musharikas and other financial institutions exempt from tax?
Ans: As per Second Schedule of the Act, modarabas, musharika and other financial institutions are liable to pay sales tax.