Is a Distributor a Trader or a Service Provider for Sales Tax Purposes: An Unnecessary Dilemma

Abstract

The sales tax jurisdiction in Pakistan is split between the federal government and the provinces – the federal government taxes the sale of goods, while the provinces impose sales tax on the provision of services. A recent judgment of the Sindh High Court overturned the general definition of services for sales tax purposes, which has resulted in chaos – the redoing of accounting for years-old transactions and the unleashing of litigation between two tiers of government entangling various taxpayers. This paper aims to critically analyse the court decision in the context of relevant literature and legislation.