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October 5, 2023

Pakistan | Sindh issues rules for collecting sales tax on IT and advertisement services remitted abroad

  • From 1 October 2023, certain banks and financial institutions must act as collection agents for withholding Sindh sales tax (SST) on information technology (IT) and advertising services received in Sindh from abroad.
  • The collection agents will collect 3% of the total 13% SST due on advertising services, so that recipients of advertising services will still be responsible for remitting the remaining 10% SST using the reverse charge.
  • For the purposes of these rules, IT services include cloud-based streaming services.

The Sindh Sales Tax on Services Act, 2011 (the SSTS Act) requires service recipients to pay Sindh Sales Tax (SST) at applicable rates upon receiving taxable services in Sindh from nonresidents (commonly referred as "reverse charge mechanism").

The Sindh Revenue Board (SRB) has promulgated the Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023 (the Rules) (see notification No. 3-4/46/2023, dated 27 September 2023) and has specified certain banks and other entities, licensed or authorized by the State Bank of Pakistan, as "collecting agents" for sales tax on information technology (IT) and advertisement services.

The Rules are effective from 1 October 2023 and require collecting agents to charge and collect SST from Sindh-based service recipients who remit payments through collecting agents, using any means of transfer, to nonresident persons providing IT or advertisement services to the residents of Sindh at the following rates.


Service description

Tax rate

Advertisement service for which payment is made through a collection agent by using any means to transfer payment to any service provider not resident in Pakistan


Services provided by software or IT-based system development consultant as covered under clause (84B) of section 2 of the Act, including cloud-based content streaming services for which payment is made through a collection agent using any means to transfer payments to any service provider not resident in Pakistan


IT services are taxable at 13%, out of which the collecting agents are required to collect 3% sales tax. Therefore, we understand that the balance 10% payment of sales tax under reverse charge mechanism will still be the responsibility of the service recipient. Clarification from the SRB on this point would be helpful. Further, the rules apply to cloud-based content streaming services, although these services are not listed as taxable services under the heading of IT services (tariff heading 9815.6000) in the Second Schedule to the SSTS Act.

The collecting agents will compute tax-collection amounts based on the gross amount of value being remitted abroad and declare it as an output tax in Annex-C of the tax return. The amount will be paid to the SRB without making any adjustment to input tax.

Note that this Tax Alert is general in nature and is not a substitute for detailed research or the exercise of professional judgment. Accordingly, no decision on any issue should be taken without seeking specific professional advice and further consideration.


For additional information with respect to this Alert, please contact the following:

EY Ford Rhodes, Karachi

EY Ford Rhodes, Lahore & Islamabad

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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