Boost Your Business!Islamabad
Restaurants Enjoy Reduced Sales Tax at Just 5%
In a move to promote digital transactions and
bolster tax compliance, the Federal Board of Revenue (FBR) has announced a
significant reduction in the sales tax rate for restaurants in Islamabad.
Effective immediately, restaurants in the capital
city will be subject to a reduced sales tax rate of 5 percent on their
services, but with one important condition.
According to the FBR’s notification, this reduced
rate of sales tax will only apply if payments are made through debit or credit
cards. The goal is to encourage the use of electronic payment methods, such as
cards, mobile wallets, and QR scanning, while simultaneously discouraging the
under-reporting of sales and revenue.
By providing a special provision for digital
payments, the FBR hopes to incentivize restaurant owners to opt for transparent
and documented transactions. As a result, those restaurants that comply and
offer digital payment options will benefit from the reduced sales tax rate of 5
percent. This represents a significant decrease compared to the standard 15
percent sales tax that was previously applicable.
However, it’s essential to note that this reduced
rate is applicable only to restaurants and similar establishments that offer digital
payment options to their customers. For payments made through other modes, such
as cash or other traditional methods, the standard 15 percent sales tax rate
with input adjustment will continue to apply.
It’s important to mention that this reduced tax
rate of 5 percent only pertains to standalone restaurants, cafes, ice-cream
parlors, coffee houses, and coffee shops. In contrast, services provided or
rendered by hotels, motels, guest houses, farmhouses, marriage halls, lawns,
clubs, and caterers will still be subject to the standard 15 percent sales tax
rate.
Even in cases where restaurants operate within
hotels, motels, or clubs, the reduced tax rate of 5 percent will apply only if
specific conditions outlined by the FBR are met.
The FBR’s decision to lower the sales tax rate on
digital payments for restaurants aims to create a more favorable business
environment, boost tax compliance, and foster the growth of the restaurant
industry in Islamabad. It is anticipated that this measure will lead to increased
transparency, revenue collection, and overall economic growth.
As this policy takes effect, restaurant owners
and customers are urged to adapt to digital payment methods to take advantage
of the reduced sales tax rate and contribute to the country’s economic
development.
