The Sindh Revenue Board (SRB) has authorized 58 restaurants and hotels in Karachi to charge a 15% service tax on digital payments, a significant increase from the previously mandated 8%.
The SRB’s decision reverses a taxpayer benefit initially introduced to encourage economic documentation.
The Sindh fiscal year 2024-25 budget originally reduced the Sindh Sales Tax (SST) on restaurant services paid through digital means, including debit and credit cards, from 15% to 8%. However, a recent SRB notification allows only selected restaurants with Point of Sale (POS) integrated systems compliant with SRB standards to revert to the 15% tax rate.
Despite the province having over 1,700 registered restaurants, predominantly in Karachi, this higher rate is limited to establishments with significant market presence, essentially high-end eateries. Tax experts have noted that this privilege is extended solely to these larger players.
The SRB clarified that the adjustments are part of the new tax guidelines for the 2024-25 tax year, reflecting changes in the provincial budget. These regulations apply to all restaurant services, including those offered in hotels, motels, guest houses, and farmhouses.
There has been some confusion in the media regarding the SRB’s position on the service tax rate. Some reports inaccurately suggested that the reduced tax rate was eliminated for all Karachi restaurants. The SRB has officially refuted these claims as misleading and incorrect. Their clarification emphasizes that the facility for a reduced tax rate on digital payments remains in effect. However, restaurants wishing to charge the standard 15% SST need explicit permission from the SRB, as per rule 42(1)(b) of the Sindh Sales Tax on Services Rules, 2011.
Customers are advised to verify the applicable SST rate before dining by visiting the SRB website or requesting written proof of authorization from the restaurant.
