Introduction
The Sindh Revenue Board (SRB) was established in 2011 under the Sindh Revenue Board Act, 2010, with the purpose of collecting sales tax on services within the province of Sindh, Pakistan. This article provides an in-depth overview of SRB, highlighting its objectives, role, achievements, and notable projects. Additionally, it distinguishes SRB from the Federal Board of Revenue (FBR), the primary tax collection agency in Pakistan responsible for collecting federal taxes.
Establishment and Background
The Sindh Revenue Board (‘SRB’) was established in Karachi in 2011 under the Sindh Revenue Board Act, 2010 to collect sales tax on services provided or rendered within the province of Sindh.
Sindh is one of the five provinces of Pakistan, the others being the Punjab, Baluchistan, Khyber Pakhtunkhuwa and Gilgit Baltistan. Karachi is the capital of the Sindh province, a major port, and a major commercial hub. More than 70% of federal taxes are collected from Karachi alone. Prior to 2010, sales tax on services, although a provincial subject in Pakistan, was collected by the federal government through its ‘Federal Board of Revenue’ the main revenue collection agency of Pakistan, powers being delegated under the Sindh Sales Tax on Services Ordinance, 2000.
After return of democratic government to power in 2008, Parliament jointly passed the 18th Amendment to the Constitution of Pakistan, 1973 delegating several powers and functions to the provinces, to give them more self-governance and legislative and financial autonomy. The Government of Sindh then promulgated the Sindh Revenue Board Act, 2010 to establish the Sindh Revenue Board (‘SRB’). Similarly, the other provinces set up their own revenue authorities in later years.
Objectives and Role
The primary objective of the SRB is to improve revenue collection for the province, and regulate related matters including tax policy, taxpayers’ education, facilitation, and tax administration. It is responsible for administering and collecting sales tax on services within the province of Sindh. Its collection constitutes more than 50 percent of the Sindh tax revenues. Its role includes identifying taxable services, registering service providers, assessing tax liabilities, collecting taxes, and enforcing tax laws. It also assists and guides taxpayers, maintains a database of taxpayers, and promotes awareness of tax laws and compliance. The SRB also assists the Government of Sindh in overall fiscal and economic policies for the province. SRB has also been empowered to collect contributions under the Sindh Workers Welfare Fund Act, 2014 and the Sindh Companies Profit (Workers’ Participation) Act, 2015.
Difference from FBR
The Federal Board of Revenue (‘FBR’) is the primary tax collection agency in Pakistan responsible for collecting federal taxes, including income tax, sales tax, and customs duty. The SRB, on the other hand, is a provincial tax authority that only collects sales tax on services within the province of Sindh. The main difference between the two is that the FBR is a federal agency administering multiple taxes, while the SRB is a provincial agency administering sales tax on services, while other provincial taxes are collected by other provincial agencies such as Excise and Taxation department, Board of Revenue etc.
Organization
The SRB is headed by a chairperson and has five Members, several Commissioners, and various other officers (see organogram below). Its headquarters are in Karachi, the capital city of Sindh, and branch offices in Hyderabad, Sukkur, Mirpurkhas and Larkana.
Source: SRB Annual Report 2021-22
Performance of SRB
The SRB has made considerable progress in enhancing revenue collection in Sindh since its establishment. Its revenue collection increased from PKR 25 billion in the first year after its establishment in 2011-12 to PKR 154 billion in 2021-22, reflecting an increase of 616% over the past decade (see chart below). The SRB has also achieved an average annual growth rate of over 20% in revenue collection during the past five years.
Main Sectors
The SRB has gradually increased the number of services within its sales tax net, and now administers the tax on over 30 kinds of services. However, the following chart shows the top ten revenue generating sectors, with the 2021-22 revenue collection shown against each.
Achievements and Projects
The SRB has implemented several initiatives to improve tax compliance and increase revenue collection. These include:
- Implementation on service sectors: After its establishment, the SRB implemented sales tax on several service sectors in Sindh, including telecommunications, banking, insurance, and advertising. It also implemented sales tax on transportation services, including ports, airlines, railways, and road transport services.
- Expansion of Tax Base: The SRB gradually expanded its tax base by identifying new taxable services and bringing them under the purview of sales tax. It has added 19 new services to the taxable list since its establishment, resulting in a substantial increase in revenue collection.
- Automation of Tax Processes: The SRB automated several tax processes to enhance efficiency and reduce errors. These systems include online taxpayer registration, online filing of tax returns, real-time invoice verification, electronic payment of taxes through the Alternate Delivery Channel (ADC), link with Pakistan’s 1-Link network of banks, and online sharing of information with different government departments. It also developed an Audit Management System through which all notices are issued, and reports are generated bearing QR code to ensure transparency, Adjudication and Appeals Management Solutions, a Receipt Reconciliation Portal for monthly bank branch-wise revenue reconciliation with National Bank of Pakistan, and many more. Of these systems were developed with in-house expertise.
- Online Tax Registration and Tax Return Filing: SRB’s secure online portal allows taxpayers to register themselves and file their tax returns online. As of March 2021, over 83% of taxpayers registered with SRB have filed their tax returns online.
- Taxpayer Facilitation Centers: The SRB has established 12 taxpayer facilitation centres across Sindh to help and guidance to taxpayers. These centres have helped over 78,000 taxpayers in registering for sales tax and filing their tax returns.
- Awareness Campaigns: The SRB has launched several awareness campaigns to educate taxpayers about their tax obligations and promote tax compliance. These campaigns have resulted in an increase in the number of registered taxpayers, with over 12,000 new taxpayers registered in the fiscal year 2020-21.
- Sindh Institute of Fiscal Management (SIFM) – the training arm of SRB – is the first of its kind in any provincial tax organization which provides pre-service, on-the-job, and in-service training to the officers and staff enabling them to achieve excellence in professional knowledge and expertise.
Anti-Evasion Measures Through Automated Tracking of Activities
SRB has relied on automation to increase efficiency and fill tax gaps. Automation is used for all its internal processes. During the process, SRB also achieved a direct interactive interface with taxpayers, enabling direct online interaction with taxpayers for routine day-to-day correspondence to replace the conventional paper-based interaction. It has gone a step further to introduce tracking measures such as points of sales (POS) integration and monitoring of reporting trends and inconsistencies in reporting. This is explained below:
- Point of Sales (POS) regime: SRB has successfully designed, developed, and implemented a POS (point of sales) integration system for live reporting of sales of restaurants and other service providers. The first phase involved the integration of sales of restaurants. SRB was able to ensure integration of 276 chain restaurants with 592 branches as well as the biggest online food delivery service of Pakistan. This is aimed at increasing revenue through live and guaranteed reporting of sales ensured through QR code verification system. A mobile app ‘eSRB’ has been developed for consumers to verify invoices and report unverified invoices. Further, a control room at SRB monitors activities and acts whenever inconsistencies such as gaps in reporting occur.
- Use of BI Tools: A comprehensive BI tool has been developed to monitor and detect inconsistencies in reporting. These tools enable officers to monitor trends and generate reports of inconsistencies between buyer and seller reports to identify short payments and take corrective action.
Statutory Tax Rate and Adjustments
To promote tax compliance, the SRB has gradually reduced its tax rate, and the current statutory standard rate of tax on services stands at 13%, the lowest amongst all the provinces and the Federation. As with all value added taxes, registered persons while determining their tax liability are entitled to claim input tax credits for the tax paid on account of taxable purchases consumed proportionately, as prescribed by SRB.
Tax Implementation on Restaurants and Hotels
The SRB has implemented sales tax on services of restaurants and hotels in Sindh since 2013. It has imposed a standard rate of 13% on restaurants, cafes, and eateries offering food and beverage services, while hotels and guest houses are subject to a sales tax of 14%. It has also introduced rules and regulations for the hospitality sector. These rules require hotels, restaurants, and cafes to maintain proper records of sales and purchases, issue sales tax invoices, and file tax returns on a regular basis.
To facilitate taxpayers in the hospitality sector, the SRB has established a special desk for the hospitality sector at its Taxpayer Facilitation Center in Karachi, which aids and guidance to taxpayers. It also organizes regular workshops and seminars to educate taxpayers about tax compliance and the procedures for tax registration and filing.
Conclusion
The Sindh Revenue Board (SRB) has played a significant role in improving revenue collection and management in Sindh since its establishment. The Board has implemented several initiatives to promote tax compliance and increase revenue collection, including online tax registration and return filing, taxpayer facilitation centres, awareness campaigns, automation of tax processes, and expansion of the tax base. The SRB has also implemented sales tax on various service sectors, including restaurants and hotels, and introduced rules and regulations to ensure compliance. The SRB’s performance over the past decade reflects its commitment to achieving its objectives and promoting tax compliance in Sindh.
The writer is Customs, Tariff and Trade Expert