KARACHI: The Sindh government has unveiled a major overhaul of its taxation structure in the FY2025–26 budget, reducing the sales tax on services from 10% to 8% and proposing the complete removal of five levies to ease the financial burden on individuals and businesses.
Presenting the Rs3.45 trillion provincial budget on Friday, Chief Minister Syed Murad Ali Shah said the reforms aim to simplify Sindh’s tax regime and encourage economic activity. “We are committed to reducing the cost of doing business and minimizing unnecessary litigation,” Shah said in his budget speech.
A key change includes shifting from the current Positive List system — where only listed services are taxed — to a Negative List model, under which all services will be taxable except those specifically exempted. This approach, Shah stated, will broaden the tax base while maintaining exemptions for essential and social services.
“This transformation will reduce disputes over service classification and make compliance easier for businesses,” he added.
The CM also announced that five existing levies would be completely removed in the upcoming fiscal year, though specific names of the taxes were not disclosed in the speech. The goal is to streamline the tax system and lower compliance costs.
To protect small businesses, the government reaffirmed that entities with annual turnover below Rs4 million will remain exempt from sales tax. This measure, according to officials, is meant to support micro and small enterprises amid inflationary pressures.
Tax experts have welcomed the reduction in sales tax and the shift to a Negative List, calling it a step toward a more predictable and efficient tax system. However, they urged clarity on the five levies proposed for removal and how the government plans to offset any revenue loss.
The reforms come as part of a broader fiscal strategy aimed at expanding the provincial tax net while ensuring that the burden on low-income groups and small businesses is minimized.
