General Sales Tax on services has increased over the past five years and in order to further increase GST collections, the Punjab Revenue Authority (PRA) has decided to introduce a new plan to bring more services under the tax net. According to PRA chairman Dr. Raheel Ahmed, small field offices will be setup in the province for tax collection purposes.
PRA will initially be setting up field offices in Sahiwal, Gujrat, and Bahawalpur, and later other districts will also be targeted. PRA already has its offices in Rawalpindi, Faisalabad, Gujranwala, and Multan with its headquarter located in Lahore. The authority has already hired 20 officers for its field offices and will hire more once the expansion of the program kicks off.
Forming up such field offices will increase the chances for Punjab government to meet its service tax collection target of Rs. 130 billion for the current fiscal year. PRA set service tax collection of Rs. 110 billion but the Punjab government asked the authority to set up bigger goals for tax collection.
Service tax collection has increased rapidly over the past 2-3 years in the province. Service tax collection has increased from Rs. 43.6 billion in 2015 to Rs. 82.4 billion in 2017. Achieving the Rs. 130 billion target for the current fiscal year won’t be an easy job and that is why such field offices have been setup to increase service tax collections.
Raheel Ahmed believes that the target is quite ambitious but they are planning to achieve it by bringing more services in the tax bracket. According to Raheel, construction and food sectors have huge potential to contribute to the services tax revenue. Thus, these sectors will be targeted so that tax revenue can be earned from them.
While the PRA is working on achieving its ambitious targets, it is receiving certain resistance from a few sectors and motor showroom owners are one of them. Raheel Ahmed said that they have made it clear to the owners that if they are earning taxable income then they are liable to pay tax. Certain services are still not paying taxes but PRA is working to ensure that they start paying taxes in order to achieve its target.
The services sector is growing rapidly and hence proper measures need to be taken in order to get more services under the tax bracket. In the last fiscal year, the services sector achieved a growth rate of 5.98% which was greater than the 4.26% growth in the commodity producing sector.
PRA has played a crucial part in tax collection in Punjab ever since its establishment in 2012. The authority has increased the registered tax payers from a few hundred to more than 40,000 over the last five years. Punjab currently has 80 taxable services as compared to 104 in Sindh. The lesser number of taxable services is because the Punjab government has clubbed a lot of services together.