The Sindh government has unveiled a series of tax reforms aimed at simplifying the provincial tax structure and reducing the financial burden on both individuals and businesses. These changes, part of the Rs 3.45 trillion budget for fiscal year 2025–26, were announced by Chief Minister Syed Murad Ali Shah during his budget speech on Friday.
A key measure in the reform package is the reduction of the Sindh Sales Tax (SST) on services by two percentage points—from 10% to 8%. Additionally, five existing levies are proposed to be completely abolished in the upcoming fiscal year to ease compliance and encourage economic activity.
In a significant structural shift, the provincial government plans to move from the existing Positive List system (where only listed services are taxable) to a Negative List model. Under this model, all services will be considered taxable by default, except those specifically mentioned as exempt. According to CM Murad Ali Shah, this reform is expected to broaden the tax base, minimize classification disputes, and reduce the volume of litigation between taxpayers and authorities.
Currently, the dual treatment—where some services are taxed while others are not—creates ambiguity and fosters legal challenges. By introducing a Negative List framework, the government aims to establish clarity and consistency in the taxation system. However, essential and socially critical services will remain exempt, and newly included services may be subject to a lower tax rate to avoid undue pressure on service providers.
To support micro and small enterprises, the Sindh government also confirmed that businesses with an annual turnover below Rs 4 million will continue to be exempt from sales tax. This measure is intended to shield small-scale entrepreneurs from the administrative and financial complexities of tax compliance.
Overall, these changes signal a progressive step toward a more transparent, fair, and efficient tax regime in Sindh, aligned with broader goals of fiscal sustainability and economic growth.
