Provinces table VAT bills in assemblies

Funeral, burial among services to be exempted

ISLAMABAD: All provincial governments have tabled draft legislations in their respective assemblies for imposing Value-Added Tax (VAT) on the services sector including travel agencies, tour operators, services in areas of culture, sports and entertainment, hotels and restaurants, transport services, telecommunications and others from July 1.

This has been done to comply with a key IMF condition for the approval of the fifth tranche of $1.2 billion. Certain services have now been proposed to be brought into the VAT net from the next fiscal year 2010/11.

According to the draft legislation bills of the provinces, copies of which are available with The News, certain services remain exempted from the proposed VAT from the next fiscal year.

The exempted services included funeral, burial or similar services, services by religious institutions exclusively for the observance of religious practices, services by (an approved non-profit charitable organisation], financial services, a supply of “educational services,” consisting of tuition or instruction for students provided by an institution duly registered by the ministry of education, being-

(a)A pre-primary, primary or secondary school;

(b)A technical college, community college or university;

(c)An educational institution established for the promotion of adult education, vocational training, improved literacy or technical education;

(d)An institution established for the education or training of physically or mentally handicapped persons; and

(e)An institution established for the training of sportspersons.

The following supplies of immoveable property:-

(a)A supply of vacant land.

(b)A supply of land to the extent that it is to be used for agricultural purposes.

(c)A supply of immoveable property to the extent that the property relates to residential premises, including land that is reasonably attributable to such premises.

(d)A lease, licence, hire or other forms of supply, to the extent that it is a supply of the right to occupy or be accommodated in residential premises. A supply of holiday or hotel accommodation, if the accommodation is provided to an individual (alone or together with other individuals) who resides therein under terms consistent with a landlord and tenant agreement and for a continuous period of more than 45 days (counting the first day on which the person is supplied the accommodation and disregarding the day on which the person ceases to be provided with the accommodation).

According to the proposed bill, a supply of services that is made in Pakistan and is not subject to tax under the Federal Value-Added Tax Act or a Provincial Value-Added Tax, other than this Act, is made in the province if the registered office of the supplier, or of the supplier’s Value-Added Tax representative in Pakistan, is located in the province.

A supply of services shall be zero-rated if it consists of the repair, maintenance, cleaning, renovation, modification, treatment of goods brought temporarily into Pakistan, so long as the goods are removed from Pakistan after the services have been performed and are not used in Pakistan except to the extent required to perform the service.

A supply of services that are typically performed directly in the physical presence of individuals shall be zero-rated if the services are performed outside Pakistan. A supply of telecommunications service by a telecommunications supplier resident in Pakistan to a telecommunications supplier resident outside Pakistan shall be zero-rated.