ISLAMABAD: With a four-year delay, the Federal Board of Revenue has set a July 1 deadline to implement the decision to connect professional services online with tax machinery across the country.

The first draft rules for the plan were published on Dec 22, 2023. These proposed rules were later changed by another notification SRO428 of 2024, which established a precise time frame for implementing the decision from July 1.

An official source told Dawn that during the tenure of the caretaker government, the Special Investment Facilitation Council (SIFC) took very serious notice of the non-implementation of the scheme in urban cities to raise income tax from professional service providers who earn money mostly in cash and do not pay any tax on it.

In August 2020, the then-tax officials announced in SRO779 that 12 categories of sales and service providers should interface with FBR to track their sales and services. Under this decision, electronic devices and software will be installed on the premises of these services. Later, the list was expanded to include two more service providers — foreign exchange dealers/exchange businesses and private educational institutions.

FBR sets July 1 deadline for service providers to connect with online system

However, private schools, colleges, universities and professional institutes/vocational training centres will be subject to these laws if the monthly fee per child exceeds Rs1,000.

The FBR’s latest SRO of March 22 has made significant adjustments to the requirements for service providers to be considered for integration. In most situations, the reach of the service providers was expanded to include the greatest number of taxpayers.

The scope of the scheme will not cover only those restaurants, hotels, motels, guest houses, marriage halls, marquees, and clubs including race clubs having no installed facility of air-conditioning.

Earlier, there were other parameters for exemption which have now been removed to expand the scope of the tax drive to maximum taxpayers.

In the case of inter-city travel by road, the exemption condition of travel service maintaining a fleet of fewer than 10 vehicles is now reduced to five vehicles. This will bring maximum inter-city travel under the tax regime.

All medical service providers including dentists, physiotherapists, plastic surgeons, hair implant surgeons, and veterinaries (doctors of animals) to be integrated with the FBR irrespective of any conditions.

The condition of the consultation fee is now reduced to more than Rs500 per patient from earlier Rs1,500. Doctors make a lot of money from private practice and surgeries, but there is no mechanism in place to tax their earnings.

The big change is that all kinds of pathological laboratories, and medical diagnostic laboratories irrespective of locations or branches will be eligible for the scheme. Similarly, all kinds of private hospitals and medical centres will also be registered with the FBR.

The scope of the scheme was extended to health clubs, gyms, physical fitness centres, swimming pools and multipurpose clubs such as Lahore Gymkhana, Islamabad Club, Chenab Club, Karachi Gymkhana, Royal Palm Lahore, Polo Club, etc., operated by any civilian/non-civilian administration.

All photographers, videographers and event managers will be integrated with the FBR who charge more than Rs50,000 per event. Earlier, this limit was Rs100,000. Accountants were specified and required to be integrated: chartered accountants and cost and management accountants.

Published in Dawn, March 26th, 2024

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