In a recent development, international food chains operating within the territory of Islamabad are reportedly charging a higher rate of sales tax on card payments despite the reduced rate implemented by the government. According to officials from the Federal Board of Revenue (FBR), these chains are obligated to apply the reduced sales tax rate of 5% on credit and debit card transactions. However, due to software issues, they continue to deduct a 15% sales tax instead.
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The government had introduced a significant documentation measure, allowing for a reduced sales tax rate of 5% on credit and debit card payments at restaurants and eateries from July 1, 2023. This reduced rate applies to various food service outlets, including restaurants, cafes, food parlors, coffee houses, and eateries, among others.
Under the new policy, the reduced tax rate is applicable when payments are made through debit or credit cards, mobile wallets, or QR scanning methods. However, it is important to note that no input tax adjustment or refund will be admissible in such cases. On the other hand, a 15% sales tax rate is to be applied for payments made in cash at these establishments.
While the government’s initiative aimed to facilitate customers and promote digital transactions, the ongoing software glitch experienced by international food chains has resulted in customers being overcharged in terms of sales tax. The FBR officials have emphasized that these chains are legally obligated to adhere to the reduced sales tax rate and rectify the software issue promptly.
The FBR is actively working to address this matter and ensure compliance with the government’s policy. It is expected that the international food chains will rectify their software glitches to align with the reduced sales tax rate of 5% on card payments as mandated by the government.
As the issue gains attention, customers are advised to verify the sales tax rate being applied on their card payments at international food chains and report any discrepancies to the relevant authorities. The FBR remains committed to resolving this software glitch and ensuring a fair and transparent taxation system for all customers in Islamabad’s food establishments.
