The Federal Board of Revenue (FBR) has announced a July 1 deadline to bring professional services under the tax net, ending a four-year delay. This initiative aims to digitize and monitor transactions of various professional service providers to ensure tax compliance.
Originally proposed in December 2023, the draft rules underwent revisions, culminating in the SRO428 of 2024 notification, which outlines the implementation framework starting July 1. The move was spurred by the Special Investment Facilitation Council’s (SIFC) concern over tax evasion by professionals, especially in urban areas, who predominantly deal in cash transactions.
The 2020 mandate, under SRO779, identified 12 service sectors for integration with FBR’s digital systems to track sales and services. This list later expanded to include foreign exchange businesses and private educational entities, applying to institutions charging over Rs1,000 per student monthly.
The latest adjustments broaden the tax net, removing previous exemptions and lowering thresholds for inclusion. Notably, the scheme now encompasses a wider range of service providers, from medical practitioners to event managers, without specific conditions.
Restaurants, hotels, and similar establishments lacking air conditioning are exempt, a shift from earlier criteria. The tax initiative also revises the exemption for inter-city travel services, now applying to operators with fewer than five vehicles, aiming to maximize tax collection in this sector.
Medical professionals, including specialists across various fields, will be integrated regardless of their fees, addressing the lack of a taxation mechanism for their often substantial earnings. Diagnostic and pathological labs, private hospitals, and medical centers, irrespective of their size or location, will also fall under the new tax regime.
Furthermore, the reforms extend to lifestyle and recreational services like health clubs, gyms, and prestigious clubs operated by both civilian and military administrations. Event-related services such as photography and event management will require integration if charges exceed Rs50,000 per event, reducing the previous limit of Rs100,000.
The FBR’s directive also specifies the inclusion of accountants, both chartered and cost management professionals, underlining the comprehensive approach to expanding the tax base and enhancing revenue collection from professional services across Pakistan.
