UIG (PVT.) LTD. vs MEMBER INLAND REVENUE (SALES TAX) Ss — 2026 PTD 441 KARACHI-HIGH-COURT-SINDH

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UIG (PVT.) LTD. VS MEMBER INLAND REVENUE (SALES TAX) Ss. 2(74), 2(79) & 3---Sales Tax Act (VII of 1990), S. 3---Constitution of Pakistan, Art.70(4) & Fourth Schedule, Federal Legislative List, Pt. I, Entry 49, [as amended through the 18th Amendment to the Constitution]---Letter dated 04.03.2009 issued by the Federal Board of Revenue---Sales tax on services---Food and beverage business (hotels / restaurants) , services rendered by---Federal subject or Provincial one---"Restaurant", definition of---Scope---Plaintiff (the proprietor of a hotel chain of food and beverage business) sought determination as to whether the levy of sales tax on the business of hotels and restaurants is a subject that falls within the Federal or Provincial domain, and whether the supplies made during the course of such business are taxable under the Sales Tax Act, 1990 ('Federal Statute')or the Sindh Sales Tax on Services Act, 2011 ('Provincial Statute')---Held: By virtue of Entry 49 of the Federal Legislative List, Part I in the Fourth Schedule to the Constitution of Pakistan, as amended through the 18th Amendment by the addition of the words "except sales tax on service", the subject of levy of a sales tax on any service falls squarely within the Provincial domain and the Provincial Statute having been promulgated accordingly---Section 2(79) of the Provincial Statute defines the term "service" while the term "restaurant" is defined under S. 2(74) of the Provincial Statute and the services provided or rendered by restaurants have been classified under Tariff Heading 9801.2000 in the First Schedule of the Provincial Statute---Thus, from said definitions and classification (under Tariff Heading) it is manifest that the Provincial Statute treats the business of restaurants to be a service---Even otherwise, through the cumulative effect of number of letters by Federal Board of Revenue (i.e. letter dated 04.03.2009 issued by the Second Secretary (FE), Inland Revenue Wing, letter C. No. 1(3)FED/2007, dated 25.07.2009, letter bearing No. SRB-STM-3-4/48 addressed by the Member (L&C) to the Member (Inland Revenue) is that the services provided by the hotels and restaurants do not come in the definition of goods produced or manufactured---Even, the Sindh Revenue Board (SRB) also issued a clarification on 22.02.2012 in respect of restaurants that the same are "taxable services" liable under in terms of S. 3 of Sindh Sales Tax on Services Act, 2011---Thus, it is apparent that the supply of food and beverages by the Plaintiff through its restaurants constitutes a service in terms of the Provincial Statue, chargeable with sales tax thereunder, and falls beyond the pale of the Federal Statute and purview of the FBR, with the main issue framed for determination being answered in such terms---Suit, filed by the proprietor of hotel chain of the food and beverage business, was decreed accordingly.

UIG (PVT.) LTD. vs MEMBER INLAND REVENUE (SALES TAX) Ss — 2026 PTD 441 KARACHI-HIGH-COURT-SINDH

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