In a bold policy shift, the Punjab government has mandated telecommunication, banking, and insurance companies to withhold up to 80% of sales tax on services at the time of payment. The move is aimed at enhancing tax compliance and ensuring efficient revenue collection.
According to a notification by the Punjab Revenue Authority (PRA), the change comes through an amendment to the Punjab Sales Tax on Services (Withholding) Rules, 2015, with the introduction of a new provision—Rule 5a.
Under this rule, telecom, banking, and insurance companies must withhold 80% of the tax when purchasing taxable services (excluding advertisement services) from active taxpayer companies. The remaining 20% is to be deposited by the service provider.
For other sectors, only 20% of the tax is to be withheld, with the rest paid by the service provider. This tiered approach targets better documentation in high-revenue industries and curbs evasion.
