Law: Sindh Sales Tax on Services Act, 2011

Section: 2(19),2(72C), 63(5), 3, Ist and 2nd schedule

Summary ;

The case involves a Reference Application challenging an order by the Appellate Tribunal, Sindh Revenue Board (SRB), regarding the demand for sales tax on "Business Support Services" provided by the Applicant. The Applicant contended that the rental of immovable property, even when combined with ancillary services, should not be treated as a taxable service under the Sindh Sales Tax on Services Act, 2011, citing the precedent set in Young’s (Pvt) Limited case.

Core Legal Issues

Taxability of Renting Immovable Property
The key question was whether renting immovable property by a landlord for consideration is a taxable service under the Sindh Sales Tax on Services Act, 2011. The Court referred to the precedent of Young’s (Pvt) Limited, where it was held that renting of property is not a service and therefore not subject to sales tax. This position was maintained by the Supreme Court and upheld despite amendments in the law and a dismissed review petition by the department. The Applicant had paid 3% tax on the rental income, but for the period before 2017, no tax was payable as per the unamended law and judicial interpretation1.

Separate Invoicing and Distinction of Services
The Applicant issued invoices separately for rental and ancillary business support services, charging tax only on the taxable services. The Tribunal erred in treating the entire amount as taxable under Business Support Services without considering the separate invoicing and nature of services rendered. The Court held that the mere issuance of a common invoice does not make all services taxable if they are distinct in nature1.