The CBR has issued instructions to all collectors of sales tax that a hotel, if providing or rendering taxable services to its clients or members shall charge, collect and pay sales tax at the rate of 15 percent of the service charges received from such services and file monthly sales tax return-cum-payment challan within the due date.
However, in case of a restaurant providing food, beverages and other eatable items only and not providing taxable services, it is to be treated as "manufacturer" and accordingly exemption threshold prescribed for manufacturers should apply for the purpose of sales tax registration.
The CBR has directed all collectors of sales tax that a number of queries have been received in CBR from various quarters regarding exemption threshold pertaining to services provided by laundries, dry cleaners, beauty parlours, caterers, hotels and restaurants.
It is clarified that the exemption threshold pertaining to laundries, dry cleaners, beauty parlours and caterers should be the same as prescribed for retailers and manufacturers i.e. they are required to be registered and liable to charge, collect and pay sales tax if their annual turnover is more than Rs 5 million.