Desk Report: The National Board of Revenue (NBR) has revised the VAT and supplementary duty (SD) rates on nine goods and services, including mobile phone usage, internet services, and medicines, in response to public outcry.
Two weeks after the government raised taxes on nearly 100 goods and services, a move that drew criticism for potentially fueling inflation (which has remained above 9 percent since March 2023), the NBR has decided to reduce several of the revised indirect taxes.
In a press release today, the NBR announced the following changes:
- The SD on mobile phone usage has been reduced from 23 percent to 20 percent.
- The 10 percent SD on broadband internet services has been withdrawn.
- VAT on restaurants has been reduced to 5 percent, down from 15 percent.
- VAT on ready-made clothes from branded fashion stores has been lowered to 10 percent from 15 percent, while VAT on non-branded clothes has been set at 7.5 percent, compared to 7.5 percent for both categories previously.
- VAT on motor workshop services has been maintained at 10 percent.
- VAT on trade in medicine has been restored to the previous rate of 2.4 percent, reduced from 3 percent.
However, the revised VAT rate of 15 percent on services at three- to five-star hotels will remain unchanged, as these establishments are allowed to claim input tax credits.
These changes come after protests from various sectors and stakeholders who voiced concerns over the economic impact of the previous tax hikes. The NBR’s revisions are aimed at addressing some of these concerns while still maintaining higher taxes on certain services.