KARACHI, June 17: The Sindh government made a feeble attempt in the 2013-14 budget to broaden the provincial tax base by including several new service providers under the sales tax regime.

Sindh Chief Minister Syed Qaim Ali Shah, who also holds the portfolio of fina-nce, in his budget speech admitted that the tax base of Sindh was insufficient and limited to a few service items.

As a result of this, he said the desired tax-to-GDP ratio, set under the 7th NFC at 15 per cent by 2014-15, was not possible.

The chief minister also admitted that there was an urgent need to reform the provincial tax administration so that its operations could be expanded.

However, measures proposed for enhancing the tax base of the province are only focused towards sales tax on services whereas there is no mention of mobilisation of more resources from other avenues, tax consultants confided to Dawn.

If the provincial government had been serious about expanding the tax base and improving its resources, it should have mentioned the agriculture income tax and also given the figure of estimated tax collection, tax consultants added.

Since the budget estimates have shown a nominal growth in non-tax receipts of around Rs1.392bn at Rs28.812 billion against revised estimates of Rs27.416bn, this indicates that the provincial government was not serious in broadening the tax base.

In support of their argument, these experts said that there were no worth-mentioning measures proposed for collecting tax on real estate, property (urban and rural) restaurants and agriculture tax.

Major component of non-tax receipts are still based on collection of infrastructure cess of around Rs17bn and property tax at Rs6bn, they added.

The budget documents indicate that the provincial government would be collecting Rs10bn more or Rs42bn during 2013-14 fiscal year against current year’s estimates of Rs32bn on account of provincial sales tax on services.

Though sales tax rate on services stands unchanged at 16pc, some of the new services being brought under the tax net are being suggested to pay as low as 4pc.

Without mentioning the category of cargoes, the budget seeks to enhance the rate of infrastructure cess from 0.80-0.85pc to 0.90pc.

This means that heavy vehicles plying Sindh roads belonging to Afghan Transit Trade (ATT) and Nato/Isaf cargo would continue to enjoy exemption from the cess.

Other categories of services which are being proposed to pay sales tax from the next fiscal year include advertising agents, security agencies, commodity brokers, marriage halls and lawns, event management and public bonded warehouses.

However, services of security agencies would be taxed at 10pc instead of the standard rate of 16pc.

Similarly, small marriage halls and lawns located on plots of 800sq yds or less shall enjoy exemption in sales tax.

The budget proposes to withdraw sales tax exemption on internet and broadband services. However, internet services of up to Rs1,500 per month shall enjoy exemption for the benefit of students and households.

Among new services, beauty parlors (exceeding annual turnover of up to Rs3.6m) and race clubs are proposed to be brought in the tax net.

The beautician services would be taxed at a reduced rate of 10pc.

The Sindh government has accepted the offer made by the Sindh Chapter of the Constructors Association of Pakistan (CAP) to pay Sindh sales tax at a reduced rate of 4pc without any input tax adjustment. The bed tax of 7.5pc is proposed to be withdrawn.

However, hotels would continue to pay only Sindh sales tax on their services.