The Federal Board of Revenue (FBR) has issued a clarification on the news item appearing in Daily Business Recorder on 22nd January 2021 regarding the imposition of 16 % Sales Tax on IT Services and IT Enabled Services. FBR has stated that IT and IT Enabled Services were subject to Sales Tax at 16 % since July 2015 under Islamabad Capital Territory (Tax on Services) Ordinance, 2001. Later, FBR reduced the rate of Sales Tax on these services to 5 % vide SRO 781 (I)/2018 dated 21st June 2018.
FBR has clarified that the scope and extent of IT Services was not defined under Islamabad Capital Territory (Tax on Services) Ordinance, 2001. This was giving rise to dispute between Tax Authorities and Taxpayers’. FBR has explained that the definition of IT and IT Enabled Services was available under the Income Tax Ordinance, 2001. The same defin
ition has been adopted for Sales Tax purposes vide SRO 77 (I)/2021 dated 21st January, 2021. The recent SRO has been issued as a clarification to reduce disputes on the definition of IT and IT Enabled Services. FBR has vehemently clarified that no new tax has been imposed.