Govt slashes VAT on mobile services, restaurants, clothing, medicine
The National Board of Revenue (NBR) has reduced Value Added Tax (VAT) and supplementary duties on some goods and services, two weeks after hiking taxes on more than 100 commodities and services.
The services with reduced taxes and duties include mobile network services, restaurants, sweets, non-AC hotels, and workshops. The development came in the face of huge criticism and protests from the businesses as well as the masses.
In a press release on Wednesday, the revenue board noted that it issued four orders on tax reduction on Wednesday, preventing price hikes for the particular commodities.
Earlier, VAT and duties were raised on more than 100 goods and services through an ordinance on 9 January, midway through the 2024-25 fiscal year, in an effort to fulfill conditions set by the International Monetary Fund (IMF).
Mobile phone services
The supplementary duty on mobile phone services, including talk time and internet usage, was raised from 20 per cent to 23 per cent in the ordinance. This has now been reverted to the previous rate.
At the same time, the 10 per cent supplementary duty on internet service providers (ISPs) has been fully withdrawn.
Restaurants
VAT on restaurant bills, which was increased from 5 per cent to 15 per cent, has been reverted to the previous threshold of 5 per cent.
Clothing and sweets
The VAT on the sale of non-branded clothing has been restored to its previous rate of 7.5 per cent, after being raised to 15 per cent. However, VAT on branded clothing has been adjusted to 10 per cent from the earlier rate of 7.5 per cent.
The VAT rate for sweet shops has been reduced from 15 per cent to 10 per cent, which is still higher by 2.5 per cent than the previous rate of 7.5 per cent.
Other services
The VAT rate for non-AC hotels has been lowered from 15 per cent to 10 per cent. Similarly, a 10 per cent VAT rate has been imposed on motor vehicle garages and workshops.
Medicines
The VAT rate for medicines at the local business level, which was raised from 2.4 per cent to 3 per cent, has now been restored to 2.4 per cent. The NBR sees no reason for a hike in medicine prices after the adjustment.