KARACHI, Oct 18: Clubs are not chargeable with sales tax on fixed charges received by them as membership entrance fee, annual and monthly subscription and bonus and gratuity paid by them to their employees, the Sindh High Court ruled on Wednesday.

The order came on a number of writ petitions moved by clubs against the Sindh Sales Tax Ordinance, 2000, which sought to recover sales tax on all the services provided by them and all the amounts received and paid by them.

One petition challenged the legal validity of the ordinance while others were confined to receipt of fixed charges, which did not amount to ‘taxable’ service. Some other clubs instituted suits to challenge the levy, which remain pending.

Petitions were heard by division benches since 2001 and judgment was reserved in 2005 by a division bench, headed by Justice Sabihuddin Ahmed, after hearing final arguments.

The judgment reserved in 2005 was announced on Wednesday by a division bench, comprising Chief Justice Sabihuddin Ahmed and Justice Syed Zawwar Hussain Jaffery.

Upholding the validity of the ordinance, the judgment struck down provisions levying tax on non-service charges.

It upheld the petitioners’ contention that the entrance fee and fixed charges, including annual and monthly subscription and bonus and gratuity payable to their employees were not chargeable with tax.

Appearing for DHA Club, which had not questioned the vires of the ordinance, Advocate Khalid Jawed Khan submitted that the club was already recovering sales tax on supply of food and other actual services.

It could not be saddled with liability in respect of functions not amounting to services.

Representing the Sindh Club, Advocate Khalid Rehman also contended that the levy was unlawful.