The Pakistan Stock Exchange (PSX) has called on federal and provincial governments to address conflicts over the collection of sales tax on services. PSX wants the Council of Common Interest (CCI) to resolve the jurisdiction differences among provinces. They hope CCI will create a fair revenue-sharing formula for each province to end the ongoing dispute.
The issue arises because Sindh, Punjab, and Khyber Pakhtunkhwa have overlapping laws on which province can collect sales tax on services. Sindh’s law says tax is collected where the business is registered, while Punjab and KP tax where the service is provided. PSX highlighted that this legal confusion affects the entire services sector, including many firms listed on PSX.
Currently, provincial sales tax on services ranges from 15-16%, but some telecom services face a higher tax of 19.5% in certain provinces. PSX included this concern in its budget proposals for FY26, stressing that the dispute is hurting businesses across the country.
Additionally, PSX recommended removing the minimum tax regime for listed companies, arguing that these firms already comply fully with tax and audit rules. They said minimum tax reduces company profits even when they have losses and discourages proper documentation.
To boost the economy, PSX also suggested giving tax credits to listed small and medium enterprises (SMEs), aligning capital gains tax rates across sectors, promoting Real Estate Investment Trusts (REITs), and offering tax relief for foreign investments. They urged the government to accelerate digitization to reduce Pakistan’s large cash economy, which is estimated to be 35-50% of GDP.