Budget FY2025-26: Sindh announces to expand sales tax to all major services

The Sindh government has announced to tax 'all services' excluding essential and social services, aiming to 'expand the sales tax base and also reduce possible tariff disputes and litigations', according to budget documents released on Friday.
The provincial government announced its budget for the financial year 2025-26 on Friday, with Chief Minister Murad Ali Shah unveiling proposals for Rs3.45 trillion total outlay, with a deficit of Rs38.46 billion.
According to Sindh Revenue Board (SRB) website, the general rate of Sindh Sales Tax on services is 15% with the exception of telecommunication services, which are liable to be taxed at 19.5%. Tax is levied at reduced or concessionary rates in certain cases.
Sindh budget documents suggest the province is targeting to collect Rs388 billion in provincial sales tax on services and taxes from agriculture in FY26.
The province is projected to collect Rs300 billion in Sindh Sales Tax on services in FY25, 35% higher compared to FY24.
'The Sindh Sales tax on services has been the mainstay of provincial revenues,' CM Murad Ali Shah said during his budget speech at the provincial assembly.
'Under the existing law, all major services are taxable and a smaller segment of services is not taxable. This situation creates disputes regarding taxability of services, which leads to unnecessary litigation and also problems for the taxpayers.
'Therefore, the decision is being made to transform to negative list regime by taxing all services but at the same time taking care that essential and social services are kept exempt that a significant part of new services is subjected to reduced rate,' he said.
On the other hand, the Sindh government has proposed to completely remove five levies including professional tax, cotton fee, entertainment duty, local cess and drainage cess, according to budget documents.
The tax relief measures would 'reduce the financial burden on both individuals and businesses,' Murad Ali Shah speech text read.
Sindh govt presents Rs1.02trn Annual Development Programme for FY2025-26
'The professional tax affects salaried people and small businesses. The cotton fee adds cost to the agriculture and textile sectors.'
Besides, the yearly tax under the Motor Vehicle Ordinance for commercial vehicle is being reduced to Rs1,000, 'giving relief to transport and goods carriers'.
'There is also a proposal to end the requirement for third party insurance for motorcycle.
'The mutation fee and sales certificate fees are being reduced to Rs500 from Rs1,000,' the chief minister said.
According to Sindh Revenue Board (SRB) website, the general rate of Sindh sales tax on services is 15% with the exception of telecommunication services, which are liable to be taxed at 19.5%. Tax is levied at reduced or concessionary rates in certain cases.

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