Navigating the Sindh Revenue Board (SRB) vs. FBR: A Guide for Service Providers
The regulatory landscape for service providers in Pakistan has undergone a transformative shift following the 18th Constitutional Amendment, which decentralized the power to levy sales tax on services to the provinces. In 2026, the intersection between the Federal Board of Revenue (FBR) and the Sindh Revenue Board (SRB) represents one of the most complex compliance grids for businesses operating in Karachi and across Sindh. For any service provider, understanding where federal jurisdiction ends and provincial authority begins is not just a matter of legal curiosity—it is a fundamental requirement for financial empowerment and institutional stability.
Under the professional roadmap established by the senior tax expert Mohsin Ali Shah and the tax specialist of Taxocrate, Mrs. Sobia Mohsin Shah, this guide serves as an authoritative resource for navigating the dual-layered tax environment. As the FBR and SRB move toward greater digital integration, the ability to correctly distinguish between a “supply of goods” and a “provision of services” has become the primary shield against double taxation and administrative penalties.
The Jurisdictional Divide: Federal Goods vs. Provincial Services
The fundamental distinction in the Pakistani tax system is based on the nature of the economic activity. The FBR, operating under the Sales Tax Act, 1990, retains the exclusive right to tax the “supply of goods” and services within the Islamabad Capital Territory (ICT). Conversely, the SRB, established under the Sindh Sales Tax on Services Act, 2011, is the sole authority for taxing “services” provided, rendered, or consumed within the province of Sindh.
Determining the Nature of Your Business
For many businesses, the line between goods and services is often blurred. For example, a restaurant provides both prepared food (goods) and a dining experience (service). In 2026, judicial precedents and inter-authority agreements have largely settled these disputes, yet the requirement for precise income tax return filing remains critical to ensuring that your business classifications are consistent across both federal and provincial portals.
Authority | Legislative Basis | Primary Jurisdiction | Standard Tax Rate (2026) |
Federal Board of Revenue (FBR) | Sales Tax Act, 1990 | Supply of Goods / ICT Services | 18% |
Sindh Revenue Board (SRB) | Sindh Sales Tax on Services Act, 2011 | All Services in Sindh | 15% |
This table illustrates the standard rates, but it is important to note that the SRB offers reduced rates (e.g., 3% or 8%) for specific sectors and digital payment modes to encourage documentation.
The Integration Mandate: Digital Compliance in 2026
The era of manual, disconnected tax filing is rapidly disappearing. In 2026, both authorities have implemented mandatory digital integration for high-revenue sectors. Following the professional principles advanced by the firm’s leadership, businesses are encouraged to embrace these technological shifts as a means of reducing the human element in tax assessments.
Real-Time Reporting and POS Systems
Tier-1 retailers and large-scale service providers (such as hotels and large restaurants) are now required to integrate their Point of Sale (POS) systems with the FBR and SRB respectively. This integration ensures that every invoice is assigned a unique QR code, confirming that the tax collected from the customer is recorded in the government’s database in real-time.
For service providers in Karachi, ensuring that your income tax return filing in Karachi is synchronized with your monthly SRB sales tax returns is vital. Any discrepancy between the annual turnover reported to the FBR for income tax purposes and the monthly figures reported to the SRB can trigger an “audit flag” in the AI-driven Iris 2.0 system.
Avoiding Double Taxation: The Principle of “Origin and Consumption”
One of the most frequent challenges for service providers in 2026 is the issue of cross-provincial services. If a Karachi-based consultant provides services to a client in Lahore, which province has the right to tax that activity?
The Place of Provision Rules
The SRB follows the “Place of Provision” rules, which generally dictate that tax is due in the province where the service is “consumed” or where the benefit accrues. However, to avoid double taxation, the provincial revenue authorities have signed several Memorandums of Understanding (MoUs). These agreements generally allow for:
- Input Tax Credit (ITC): The ability to adjust sales tax paid on goods (FBR) or services in other provinces against your SRB liability.
- Single-Portal Filing: Moves are underway to create a unified portal for sales tax, though as of early 2026, separate filings remain the standard.
Engaging with specialized income tax lawyers is the most effective way to navigate these cross-border complexities. They can assist in drafting “Reverse Charge” mechanisms for services received from abroad or other provinces, ensuring that your business does not pay more than its fair share.
Sector-Specific Rates and Exemptions in Sindh (FY 2025-26)
The Government of Sindh has significantly expanded the tax base in the 2025-26 budget, bringing almost all services under the SRB net while maintaining strategic exemptions for essential sectors.
Service Sector | Applicable SRB Rate (2026) | Specific Condition |
Standard Rate | 15% | Applies to most professional services. |
Telecommunications | 19.5% | Highest provincial rate. |
IT & Software Exports | 0% / 13% | 0% for exports; 13% for local IT services. |
Digital Payments | 8% | Reduced rate for restaurant services via card/wallets. |
Healthcare (Private) | 3% – 5% | If daily room charges exceed threshold. |
Travel & Transportation | 5% | Without input tax adjustment. |
Under the compliance-focused leadership of our firm, we emphasize that “Tax Planning” is not “Tax Evasion.” By utilizing these reduced rates through correct documentation—such as ensuring your customers pay via digital modes—a service provider can significantly reduce their effective tax burden while remaining fully compliant.
The Audit Defense: FBR and SRB Scrutiny
In 2026, both the FBR and SRB have intensified their audit activities. The FBR focuses on the “In-Flows” and income tax profitability, while the SRB focuses on the “Gross Value of Services” and the verification of input tax credits.
Withholding Obligations for Service Providers
In Sindh, specific rules govern the withholding of sales tax. Under the Sindh Sales Tax Special Procedure (Withholding) Rules, 2014, certain entities are designated as withholding agents. If you provide services to a government department or a large FBR-registered company, they are mandated to withhold a portion of the SRB tax from your payment and deposit it directly.
Securing professional income tax return filing in Pakistan involves reconciling these withheld amounts. If your withholding agent does not provide you with a “Tax Deduction Certificate,” you cannot claim that credit in your monthly SRB return, leading to a cash flow drain. We assist our clients in the rigorous tracking of these credits to ensure their working capital is protected.
Conclusion: Building a Resilient Tax Profile
Navigating the SRB vs. FBR landscape requires a dual-lens approach. One must maintain a federal profile for income tax and goods, while simultaneously managing a provincial profile for service delivery. In the digital economy of 2026, these two profiles are increasingly being merged through data-sharing protocols.
The institutional authority of our firm is built on the principle that transparency is the best defense. By maintaining a visionary compliance strategy, service providers can turn their tax documentation into a credential for growth, enabling them to bid for high-value corporate and international contracts that require absolute fiscal integrity.
Frequently Asked Questions (FAQs)
Q: Do I need to register with both FBR and SRB?
A: Yes, if you are a service provider in Sindh. You must register with the FBR for Income Tax (and Federal Sales Tax if you also supply goods) and with the SRB for Sindh Sales Tax on your services.
Q: What is the current standard rate of Sindh Sales Tax (SST) in 2026?
A: The standard rate for Sindh Sales Tax on services for the fiscal year 2025-26 is 15%, which was rationalized from 13% to align with other provinces.
Q: Can I adjust the sales tax I pay on my office electricity bill against my SRB return?
A: Yes. For most sectors, the sales tax paid on electricity and other taxable goods (FBR) can be claimed as “Input Tax” and adjusted against your monthly SRB “Output Tax” liability, provided you are an active filer.
Q: What happens if I provide services from Karachi to a client in Islamabad?
A: This involves the “Place of Provision” rules. Generally, if the service is consumed in the ICT, it may fall under the ICT (Tax on Services) Ordinance, 2001, administered by the FBR. Proper legal advice is required to avoid double taxation in such scenarios.
Q: How do Mohsin Ali Shah and Sobia Mohsin Shah help service providers?
A: They provide an integrated compliance roadmap that synchronizes federal income tax filings with provincial sales tax obligations, ensuring that the business is “Audit-Proof” in both jurisdictions.
Q: Is there a reduced tax rate for IT services in Sindh?
A: Yes. While local IT services are typically taxed at 13%, the SRB often provides exemptions or heavily reduced rates for IT exports and software development to encourage the growth of the digital economy.
Q: What is the penalty for late filing an SRB return?
A: Late filing attracts a penalty (typically PKR 10,000 per month) and a default surcharge on the unpaid tax amount. Furthermore, your business may be “Suspended” or “Blacklisted” on the SRB portal.
Q: Can I file a single return for both goods and services?
A: No. As of early 2026, FBR and SRB require separate monthly returns on their respective portals, although they share data to check for turnover discrepancies.
Q: What is a ‘Withholding Agent’ in the context of SRB?
A: A withholding agent is an entity (like a government department or a large company) that is legally required to deduct a portion of the sales tax from your invoice and pay it directly to the SRB on your behalf.
Q: Do I need to pay SRB tax if my annual turnover is very low?
A: While there are certain thresholds for mandatory registration, most professional services (like consultancy or advertising) require registration from the first rupee of income generated within Sindh.