Punjab Government Reduces Sales Tax to Zero Percent

COVID-19 has affected a number of industries in Punjab including services. Considering financial difficulties faced by service providers due to economic lock down, Punjab Government reduces sales tax to ZERO percent for a number of services. Finance Department has issued notification to this effect on April 2, 2020. Federal Government on April 7, 2020 has also issued certain relief measures for supplies to Utility Stores and import of pulses.

Fun part is that availability of this ‘Zero Sales Tax’ facility is conditional. It is available without any input tax adjustment. In other words, the service provider cannot claim any input tax. Therefore, whether this relief will actually provide any utility to service providers is a big question mark in itself.

Below table provides details of services on which Punjab Government has reduced sales tax to ZERO percent:

No wonders, Finance Department has provided this relaxation only for a limited time period. Unluckily, ZERO percent sales tax relief will be available only from April 2, 2020 to June 30, 2020.

While measures taken by the Government of Punjab are highly appreciable, effects of COVID-19 will be long lasting on economy. Government, therefore, must reconsider the relief measures before announcing next fiscal budget.

Please share your thoughts in comments whether the Punjab Government’s reduction in sales tax to Zero percent for selected services would actually contribute to financial suffering of those businesses.