The government has taken a major documentation measure by allowing credit and debit card payments at a reduced sales tax rate of five percent at restaurants and eateries from July 1, 2023.
Within the territory of Islamabad, the sales tax rate has been reduced to 5 percent on payments made at restaurants through credit and debit cards. However, international chains are still charging a higher rate of sales tax.
When asked to comment on the situation by ProPakistani, a Federal Board of Revenue (FBR) official said that international chains in Islamabad are also bound to charge the reduced sales tax rate but pointed out that due to some issues in their software, they are still deducting a 15 percent sales tax.
There is no clarity though regarding what the ‘issues’ in the software are and when the issues will be fixed.
According to the sources, the FBR has taken the lead in charging a lower rate of sales tax through the documented mode of debit and credit cards. The restaurants would be bound to collect the reduced rate of sales tax of five percent in cases where the customers prefer to make payments through credit or debit cards.
Under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, a lower rate of five percent sales tax would be charged on dining out and credit or debit card payments. Among other documentation measures, the said decision would also be instrumental in discouraging cash payments and cash transactions at restaurants.
Now, the restaurants would not be able to retain the digitally paid sales tax by the consumers.
The reduced rate of five percent tax included services provided by restaurants including cafes, food (including ice cream) parlors, coffee houses, coffee shops, food huts, eateries, resorts, and similar cooked, prepared or ready-to-eat food service outlets, etc.
The tax rate has been set at five percent where payment against services is received through debit or credit cards, mobile wallets, or QR scanning subject to the condition that no input tax adjustment or refund shall be admissible. On the other hand, 15 percent sales tax would be applicable where payment is received in cash at the restaurants.
It is not just International chains, visited two local restaurants during past week, both of them charged 15%, saying that they are not aware of any reductions. I guess they got 10% bonus in the budget. There should be a helpline where customers can lodge complaints.
I also noticed this issue at Cinnabon centaurus they were charging 15% and when I complained they gave me the extra amount back 😑
What about other cities, like Karachi or is it just for Islamabad. SRB, a provincial sales tax is being charged @ 13%. Is Sindh Government is also bound to comply with this new amendment and charge 5%?