The Sindh Finance Act 2025 has officially ratified and approved the amendments proposed in the Sindh Finance Bill 2025 with minor changes, passing through the Provincial Assembly of Sindh on June 26, 2025. These amendments significantly impact businesses and taxpayers operating under Sindh Sales Tax on Services administered by the Sindh Revenue Board (SRB).
New Rate Structure – Standard, Higher, and Reduced Rates
The Sindh Finance Act maintains the standard sales tax rate at 15% but restructures the Second Schedule into two parts:
- Part I – Higher Tax Rates (19.5%) for services like hosting and IT infrastructure, telephony, internet, security systems, and installation of communications equipment. For the sake of ready reference, list of higher rate services as under:
| S. No. | CPC code | Description | Rate |
|---|---|---|---|
| 1 | 83159 | Other hosting and IT infrastructure provisioning services provided in respect of collocation services | 19.50% |
| 2 | 841 | Telephony and other telecommunications services | 19.50% |
| 3 | 842 | Internet telecommunications services | 19.50% |
| 4 | 85230 | Security systems services including vehicle tracking services and other tracking | 19.50% |
| 5 | 87340 | Installation services of radio, television and communications equipment and apparatus provided by telephony, internet and security system service providers | 19.50% |
- Part II – Reduced Tax Rates (ranging from 3% to 8%) for eligible sectors such as construction, freight transport, call centres, licensing of intellectual property, IT support services, and hospitality. Nevertheless, for below mention services, businesses can opt for reduced rates by e-filing the required option with SRB; otherwise, the standard 15% rate applies. Input tax credit restrictions also apply under Part II.
| S. No. | CPC code | Description | Rate | Conditions and Restrictions |
|---|---|---|---|---|
| 1 | 54 | Construction services | 8% | Nil |
| 54 | Construction services | 5% | The rate shall apply to construction services in relation to Government Civil Works for which the expenditure is paid out of the expenditure budget of the Federal Government, Government or the Local Government or the Cantonment Board. | |
| 2 | 6511 | Road transport services of freight | 8% | Nil |
| 3 | 6513 | Transport services via pipeline | 8% | Nil |
| 4 | 733 | Licensing services for the right to use intellectual property and similar products | 8% | The rate shall not apply to services falling under CPC code 7331 and 7335. |
| 83960 | Trademarks and franchises | |||
| 5 | 7331 | Licensing services for the right to use computer software and databases | 3% | The rate shall not apply to the services falling under CPC Code 83159. |
| 83131 | IT consulting services | |||
| 83132 | IT support services | |||
| 8314 | Information technology (IT) design and development services | |||
| 8315 | Hosting and information technology (IT) infrastructure provisioning services | |||
| 8316 | IT infrastructure and network management services | |||
| 843 | On-line content | |||
| 6 | 85931 | Telephone call centre services | 3% | The rate shall apply to the services provided or rendered by call centres. |
| 85991 | Other information services |
Expanded Definition of “Service”
Previously, the Act defined ‘service’ based only on the First Schedule’s positive list. The SFA has replaced this with an expansive definition covering “any activity, facility, utility, advantage, or assignment of rights” to capture a wider range of taxable activities. This aligns Sindh’s tax framework with modern service economies and reduces ambiguity for taxpayers.
Adoption of United Nations CPC Codes for Sindh Sales Tax
The Sindh Finance Act replaces the old, fragmented classification system with the United Nations Central Product Classification (CPC) Version 2.1 adopted by SRB via SRO 3-4/28/2025 (effective July 1, 2025). This major reform standardizes service codes, streamlines SRB registration and returns, and brings Sindh Sales Tax on Services into line with international tax classification systems.
It also empowers SRB to issue and update CPC codes by notification and to resolve classification disputes with final authority.
Shift from Positive List to Negative List
Through the Sindh Finance Act, Sindh has moved from a positive list system (only listed services were taxable) to a negative list approach where all services provided in the course of an economic activity are taxable unless specifically exempt. This is a landmark shift in tax policy and compliance in Sindh, broadening the tax base while maintaining transparency.
Federal vs. Provincial Tax Domains
The Sindh Finance Act, clarifies that services falling under Entry 53 of the Federal Legislative List, covering terminal taxes on goods or passengers by railway, sea or air, including fares and freight, remain outside provincial jurisdiction. This amendment resolves longstanding disputes such as the shipping agents’ case where the Sindh High Court struck down overlapping provincial taxes.
Updated List of Exempt Services
All exempt services have been consolidated in the First Schedule, with clear conditions and restrictions. This includes exemptions for education, health, agriculture-related services, small businesses below turnover thresholds, and export of services provided foreign exchange is received through banking channels and reported to the State Bank of Pakistan. For the sake of ready reference, list of exempt services as under:
| S. No. | CPC code | Description | Conditions and Restrictions |
|---|---|---|---|
| (1) | (3) | (2) | (4) |
| 1 | 54 | Construction services except those falling under CPC code 546 | The exemption shall be applicable to services provided or rendered in relation to:-(1) Construction and development of Export Processing Zone (EPZ), Special Economic Zone (SEZ) and diplomatic and consular buildings;
(2) Construction of an independent private residential house, having total covered area not exceeding 10,000 square feet meant for own use by the recipient of the services; (3) Construction relating to such of the low-cost affordable public housing projects as are sponsored and funded by the Federal Government or by the Government of Sindh, subject to the condition that the houses are built or constructed on plot of upto 125 square yards or covered area of the apartment and flats so built or constructed under the project, does not exceed 900 square feet; (4) Maintenance and repair in relation to agriculture, horticulture, animal husbandry and dairy farming; and (5) Construction services related to construction work undertaken by a person whose annual turnover does not exceed four million rupees in a financial year. |
| 2 | 611 | Wholesale trade services, except on a fee or contract basis | The exemption shall not be applicable to services provided or rendered by ship chandlers. |
| 3 | 62 | Retail trade services except those falling under CPC code 625 | The exemption shall not be applicable to services provided or rendered on fee or contract basis. |
| 4 | 63 | Accommodation, food and beverage services | The exemption shall be applicable to services provided or rendered in relation to –(1) Clubs, whose initiation fee for members does not exceed thirty thousand rupees and whose monthly fee/subscription for the members also does not exceed five hundred rupees;
(2) Room or unit accommodation services for students in student residences attached to educational institutions; (3) Food served by flight-kitchen on- board the conveyance leaving for a destination outside Pakistan; and (4) Restaurants and caterers whose annual turnover does not exceed five million rupees in a financial year except those which are – (i) air-conditioned on any day in a financial year or located within the building or premises of air- conditioned shopping malls or shopping plazas; or (ii) located within the building, premises or precincts of any hotel, motel, guest house, farmhouse or club whose services are liable to sales tax; or (iii) providing or rendering services in the building, premises or precincts, hall or lawn of any hotel, motel, guest house, farmhouse, marriage hall and lawn or club whose services are liable to sales tax; or (iv) franchisers or franchisees; or (v) having more than one branch or outlet in Sindh; or (vi) having total utility bills (gas, electricity and telephone) exceeding rupees forty thousand (Rs.40,000/-) in any month during a financial year. |
| 5 | 64 | Passenger transport services | The exemption shall not be applicable to services provided or rendered in relation to:(1) Rent a car and vehicle rental services;
(2) Services provided or rendered by the owners or drivers of the vehicles using the cab aggregator services; and (3) Chartered flight services within Sindh or originating from any air field in Sindh. |
| 6 | 672 | Storage and warehousing services | The exemption shall be applicable to services provided or rendered in relation to food and agricultural commodities. |
| 7 | 673 | Supporting services for railway transport | Nil |
| 8 | 69 | Electricity, gas and water distribution (on own account) except those falling in CPC Code 69111 |
Nil |
| 9 | 71110 | Central banking services | Nil |
| 10 | 713 | Insurance and pension services (excluding reinsurance services), except compulsory social security services | The exemption shall be applicable to services provided or rendered in relation to –(1) Life insurance, other than group life insurance, of individuals for insurance policy coverage of upto five hundred thousand rupees;
(2) Crop Insurance; (3) Health insurance services, other than group health insurance services, provided or rendered to individuals covered within the meaning of sub- clause (a) of clause (63) of section 2; and Marine insurance for exports. |
| 11 | 71552 | Financial market regulatory services | The exemption shall be applicable to services provided or rendered by the State Bank of Pakistan, Competition Commission of Pakistan and Securities and Exchange Commission of Pakistan. |
| 12 | 7211 | Rental or leasing services involving own or leased property | The exemption shall be applicable to services provided or rendered in relation to –(1) Renting of immovable property by a religious body to another religious body;
(2) Renting of vacant land or premises solely used for agriculture, aquaculture, farming, forestry or animal husbandry purposes; and (3) Renting of buildings solely used for residential purposes or solely used as hostels and boarding homes of a recognized educational institution. |
| 13 | 7212 | Trade services of building | Nil |
| 7213 | Trade services of vacant and subdivided land | ||
| 14 | 7331 | Licensing services for the right to use computer software and databases | The exemption shall be applicable to services exported and delivered outside Pakistan, subject to the condition that the value of export of the services is received in foreign exchange through banking channels in the business bank accounts of the registered person exporting the services and is also reported to the State Bank of Pakistan in the manner prescribed by the State Bank of Pakistan. |
| 8313 | Information technology (IT) Consulting and support services |
||
| 8314 | Information technology (IT) Design and development service |
||
| 8315 | Hosting and information technology (IT) infrastructure provisioning services | ||
| 8316 | IT infrastructure and network management services | ||
| 15 | 81 | Research and development services | The exemption shall be applicable to the services provided or rendered educational institutions recognized by the Higher Education Commission of Pakistan (HEC) and/or Sindh Higher Education Commission. |
| 16 | 822 | Accounting, auditing and bookkeeping services | The exemption shall be applicable to services exported and delivered outside Pakistan, subject to the condition that the value of export of the services is received in foreign exchange through banking channels in the business bank accounts of the registered person exporting the services and is also reported to the State Bank of Pakistan in the manner prescribed by the State Bank of Pakistan. |
| 17 | 835 | Veterinary services | Nil |
| 18 | 8363 | Sales of advertising space or time (except on commission) | The exemption shall be applicable to services provided or rendered in relation to –(1) Advertisements financed out of the funds provided by a government under grant in aid agreements;
(2) Advertisements conveying public service message in relation to polio eradication programme by UNICEF; (3) Sale of advertising space in print media (except on commission) falling under CPC Code 83631; and (4) Sale of internet advertising space (except on commission) on the website of such of the newspapers and periodicals as are published in Sindh. |
| 19 | 844 | News agency services | Nil |
| 20 | 845 | Library and archive services | Nil |
| 21 | 853 | Cleaning services | The exemption shall be applicable to the services provided or rendered in relation to fumigation and cleaning services for the purpose of agriculture, horticulture, animal husbandry or dairy farming. |
| 22 | 855 | Travel arrangement, tour operator and related services | The exemption shall be applicable to tour operators’ services provided or rendered in relation to –(1) Hajj and Umrah; and
(2) a journey organized or arranged for use by an educational institution other than a commercial, training or coaching centre, for imparting skill or knowledge or lesson on any subject or field. |
| 23 | 85931 | Telephone call centre services | The exemption shall be applicable to call centre services exported and delivered outside Pakistan, subject to the condition that the value of export of the services is received in foreign exchange through banking channels in the business bank accounts of the registered person exporting the services and is also reported to the State Bank of Pakistan in the manner prescribed by the State Bank of Pakistan. |
| 85999 | Other support services n.e.c. | ||
| 24 | 85961 | Convention assistance and organization services | The exemption shall be applicable to such convention assistance and organizing services as are provided or rendered by such marriage halls and lawns which are located on plots measuring 800 square yards or less; provided that they are not –(1) located in air-conditioned premises; or
(2) located within the building, premises or precincts of a hotel, motel, guest house, farmhouse, restaurant or club whose services are liable to tax; or (3) owned, managed or operated by caterers whose services are liable to tax; or (4) franchisers or franchisees; or (5) having branches or more than one hall or lawn in Sindh. |
| 25 | 861 | Support and operation services to agriculture, hunting, forestry and fishing | The exemption shall not be applicable to the services provided or rendered in relation to “Support and operation services to hunting” falling under CPC Code 8613. |
| 26 | 871 | Maintenance and repair services of fabricated metal products, machinery and equipment | The exemption shall be applicable to services provided or rendered –(1) in relation to machinery and equipment used for the purpose of agriculture, horticulture, animal husbandry and dairy farming;
(2) by auto workshop including authorized service station, whose annual turnover does not exceed Rs. 4 million in a financial year; (3) by workshops for electric or electronic equipment or appliances, including computer hardware, whose annual turnover does not exceed Rs. 4 million in a financial year; and (4) by car or automobile washing or similar stations, whose annual turnover does not exceed Rs. 4 million in a financial year. |
| 27 | 88 | Manufacturing services on physical inputs owned by others | The exemption shall be applicable to services provided or rendered in relation to such manufacturing or processing for others on toll basis (as are levied to Federal sales tax under the Sales Tax Act, 1990) except the services provided to non-industrial consumer. |
| 892 | Moulding, pressing, stamping, extruding and similar plastic manufacturing services | ||
| 893 | Casting, forging, stamping and similar metal manufacturing services | ||
| 28 | 8912 | Printing and reproduction services of recorded media, on a fee or contract basis | The exemption shall be applicable to the services provided in respect of newspapers, periodicals, journals and text books. |
| 29 | 91 | Public administration and other services provided to the community as a whole; compulsory social security Services |
The exemption shall be applicable to services provided or rendered by the Federal Government, Government and the Local Governments. |
| 30 | 92 | Education services | The exemption shall not be applicable to –(1) the services where the amount of fee/charges for such services exceed rupees five hundred thousand per annum per student; and
(2) sports education services falling in CPC Code 92912 provided by a person other than an individual. |
| 31 | 931 | Human health services | The exemption shall not be applicable to –(1) the services of cosmetic and plastic surgery for aesthetic purposes;
(2) the services provided by medical practitioners and consultants where consultation fee or charges exceed Rs. 3,000 per session or visit; and (3) bed/room services of hospitals where per day charges for such rooms / beds, including all fixed charges, exceed Rs. 25,000 per room / bed. |
| 32 | 931 972 |
Human health services Beauty and physical well- being services |
The exemption shall be applicable to services provided or rendered by beauty parlours, beauty clinics and slimming clinics whose annual turnover does not exceed Rs. 2.5 million in a financial year, except those which are –(1) located within the building, premises and precincts of a hotel, motel, guest house or club whose services are liable to tax; or
(2) franchisers or franchisees; or (3) having more than one branch or outlet in Sindh; or (4) having total utility (electric, gas and telephone) bill exceeding Rs. 25,000 in any month during a financial year. |
| 33 | 932 | Residential care services for the elderly and disabled | Nil |
| 933 | Other social services with accommodation | ||
| 934 | Social services without accommodation for the elderly and disabled | ||
| 935 | Other social services without accommodation | ||
| 34 | 944 | Remediation services | The exemption shall be applicable to services provided or rendered by Government. |
| 949 | Other environmental protection services n.e.c. | ||
| 35 | 95 | Services of membership organizations | The exemption shall not be applicable to the services provided against charges and fees except against fixed membership fee. |
| 36 | 96150 | Motion picture projection services | Nil |
| 37 | 963 | Services of performing and other artists | The exemption shall not be applicable to services provided or rendered by stage designers, set designers, lighting designers and costume designers. |
| 38 | 964 | Museum and preservation services | Nil |
| 39 | 966 | Services of athletes and related support services | Nil |
| 40 | 971 | Washing, cleaning and dyeing services | The exemption shall be applicable to services provided or rendered by laundries and dry cleaners whose annual turnover does not exceed Rs. 2.5 million in a financial year except those which are –(1) located within the building, premises and precincts of a hotel, motel, guest house or club whose services are liable to tax; or
(2) franchisers or franchisees; or (3) having more than one branch or outlet in Sindh; or (4) having total utility (electric, gas and telephone) bill exceeding Rs. 25,000 in any month during a financial year. |
| 41 | 973 | Funeral, cremation and undertaking services | Nil |
| 42 | 98 | Domestic services | Nil |
| 43 | 99 | Services provided by extraterritorial organizations and bodies |
Nil |
| 44 | Respective CPC Codes |
All services | The exemption shall be available to the services provided by a person whose total annual turnover does not exceed rupees four million in a financial year, excluding the following:(1) Services provided to withholding agents as notified under section 13;
(2) Services provided to persons registered with SRB and businesses registered with FBR under the Sales Tax Act, 1990 or the Income Tax Ordinance, 2001; (3) Services under the service categories where different exemption threshold based on annual turnover is provided under this Act; and (4) Services which were not exempt on account of annual turnover threshold basis as on 30th June, 2025. |
“Office” Definition Expanded
Previously, only a “registered office” in Sindh triggered tax liability. The Sindh Finance Act substitutes this with “office,” expanding the scope to any branch, project site, or operational unit in Sindh, ensuring a wider capture of taxable services rendered by non-resident or multi-location businesses.
Exclusions from “Economic Activity”
Certain official and constitutional functions, such as services performed by courts, tribunals, Parliament or Provincial Assembly members, are now expressly excluded from the definition of economic activity, creating clarity for government and public service functions.
Penalties and Compliance Under SRB
The Sindh Finance Act revises penalties for late filing of returns, delayed tax payment, or obstructing SRB’s access to records. For example, the penalty for late return filing is now Rs. 100 per day of default instead of Rs. 10,000 per month, signaling a shift toward a more proportional penalty regime. Obstruction of SRB officers can still lead to heavy fines and imprisonment. The penalties have been revised for the following offences:
| Offences | Previous Penalty | New Penalty |
|---|---|---|
| Where any person fails to furnish a return within the due date. | Such person shall be liable to a penalty of 10,000 rupees per month or a fraction thereof; provided that if a return is filed within ten days of the due date, a penalty of 300 rupees for each day of default shall be paid. | Such person shall be liable to pay penalty of 100 rupees for each day of default in filing of the return beyond the prescribed due date. |
| Where any person fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Act or the rules made there under. | Such person shall be liable to pay a penalty of 10,000 rupees per month or a fraction thereof or five per cent of the total tax payable for that period (if default is more than 3 days), whichever is higher……………………. | Such person shall be liable to pay a penalty of 10,000 rupees or five per cent of the total tax payable for that period (if default is more than 5 days), whichever is higher………………………….. |
| Where any person who denies or obstructs the access of an authorized officer to the business promises, registered office or to any other place where records are kept, or otherwise refuses access to accounts or records. | Such person shall be liable to pay penalty of 50,000 rupees or one hundred per cent of the tax payable for the tax period(s) to which the offence relates, whichever is higher. Such persons shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with a fine which may extend to an amount equal to the tax payable for the tax period(s) to which the offence relates, or with both. |
Such person shall be liable to pay penalty of 100,000 rupees or one hundred per cent of the tax payable for the tax period(s) to which the offence relates, whichever is higher. Such persons shall, further be liable, upon conviction by a Special Judge, to imprisonment for a term which may extend to five years, or with a fine which may extend to an amount equal to the tax payable for the tax period(s) to which the offence relates, or with both. |
Licenses or permissions for taxable service providers are now tied to “active taxpayer” status under section 2(1A), further integrating SRB’s regime with federal tax compliance databases.
Continuity of Tax Rates & SRB’s Power to Remove Difficulties
Taxes charged as of June 30, 2025, continue at the same rates unless expressly changed or exempted under the Sindh Finance Act. The Sindh Revenue Board is authorized (for three years post-enactment) to issue orders to smooth implementation, including modifications and adaptations as needed.
Conclusion on Sindh Sales Tax on Services
The Sindh Finance Act 2025 represents a fundamental overhaul of the Sindh Sales Tax on Services framework without changing the standard tax rate of 15%. By moving from a positive list to a negative list regime, the Act makes almost all services taxable unless expressly exempt, which broadens the provincial tax base and significantly reduces grey areas.
The adoption of the UN CPC Version 2.1 coding system streamlines classification and reporting, aligns Sindh with international standards, and empowers the Sindh Revenue Board (SRB) to resolve classification disputes authoritatively.
The Act also rationalizes the rate structure by introducing higher-rate services at 19.5% (such as telecom, internet, hosting, security systems and related installations) and reduced-rate services ranging from 3% to 8% (including construction, freight transport, IP licensing, IT/ITES, call centres and hospitality). These reduced rates are only available through an e-filed election with SRB and generally bar input tax credits, requiring careful cost and pricing analysis by businesses.
Exemptions have been consolidated in the First Schedule with strict conditions and thresholds, particularly for education, health, agriculture-related services, small businesses and exports where foreign exchange must be received through banking channels and reported to the State Bank of Pakistan.
Other key changes include expanding the “office” definition to cover any branch or operational site in Sindh (not just a registered office), clarifying that services falling under Entry 53 of the Federal Legislative List remain outside provincial jurisdiction, and revising the penalty regime to a more proportional but still rigorous system (such as Rs. 100 per day for late return filing). Licensing and regulatory permissions are now tied to both SRB registration and “active taxpayer” status, embedding tax compliance into broader business operations.
Overall, the Sindh Finance Act 2025 transforms Sindh Sales Tax on Services into a more comprehensive, internationally aligned and compliance-driven regime. Businesses operating in Sindh need to re-map their services to CPC codes, assess eligibility for reduced rates, strengthen documentation for exemptions and exports, and tighten compliance calendars to avoid penalties. This proactive approach will ensure smoother SRB interactions, preserve margins and reduce audit risk under the new framework.
FAQs — Sindh Sales Tax on Services
Q1: What is the standard Sindh Sales Tax on Services rate after the Sindh Finance Act 2025?
The standard rate stays at 15%. All services are taxable at this rate unless they fall under the higher-rate category of 19.5% or an approved reduced-rate band between 3% and 8%.
Q2: Which services are taxed at 19.5%?
High-rate services listed in Part I include hosting and IT infrastructure provisioning (CPC 83159), telephony (841), internet telecommunications (842), security systems and vehicle tracking (85230), and installation of communications equipment by telecom/internet/security providers (87340).
Q3: How do the reduced rates between 3% and 8% work?
Part II offers reduced rates for sectors like construction, freight transport, licensing of intellectual property, IT/ITES, call centres, and hospitality. To benefit, a business must e-file an option with the SRB. Without this election the standard 15% applies, and input tax credit is generally not available under the reduced rates.
Q4: How has the definition of “service” changed?
The Act replaces the old positive list with a broad description covering “any activity, facility, utility, advantage or assignment of rights,” so almost every service activity is taxable unless specifically exempt.
Q5: Why are UN CPC Version 2.1 codes important?
CPC codes standardize service classification in Sindh, streamline SRB registration and return filing, and give SRB clear authority to issue codes and resolve classification disputes. This aligns the province’s tax system with international standards.
Q6: What does “negative list” mean?
It means all services are taxable by default unless they are expressly exempt. This replaces the previous “only-if-listed” approach and broadens the tax base.
Q7: What services are exempt now?
Exemptions are consolidated in the First Schedule with detailed conditions and thresholds. They include certain education, health, and agriculture-related services, small-turnover reliefs, and exported services where foreign exchange is received through banking channels and reported to the State Bank of Pakistan.
Q8: What changed in the “office” definition?
Any branch, project site or operational unit in Sindh now triggers tax liability, not just a registered head office. This widens the tax nexus for multi-location and non-resident businesses.
Q9: Which activities are excluded from “economic activity”?
Official and constitutional functions, services by courts, tribunals, Members of Parliament or Provincial Assemblies, and individuals holding constitutional posts, are now expressly excluded from the definition of economic activity.
Q10: What are the revised penalties?
Late return filing now incurs a Rs. 100 per day penalty instead of Rs. 10,000 per month. Late payment can attract the greater of Rs. 10,000 or 5% of tax due after a five-day threshold. Obstructing SRB access to records still carries heavy fines and potential imprisonment.
Q11: How are licenses and permissions linked to SRB compliance?
Licensing or renewal of permissions is now contingent not only on SRB registration but also on being an “active taxpayer” under section 2(1A). This integrates SRB compliance with other regulatory approvals.
Q12: Will existing rates automatically change after June 30, 2025?
No. Services taxed on June 30, 2025 continue at the same rates unless expressly changed or exempted under the Act. SRB has a three-year window to issue “removal of difficulty” orders to ease implementation.