VAT Deduction Guideline for providing IT Enabled Service

VAT Deduction Guideline for providing IT Enabled Service

The guideline has clarified the applicability of VAT deduction for IT Enabled Services in cases where the service provider charges VAT at a rate of 15%. The details are given below:

• Registered service providers have the option to voluntarily charge 15% VAT for IT Enabled Services instead of the reduced rate of 5%. However, the withholding entity must deduct VAT at a source rate of 5% as per Rule 3(2) of SRO 240 AIN/2021/163-Mushak.
• Additionally, the service provider needs to deposit the collected VAT into the government treasury within the prescribed timeline and collect Mushak 6.6 from the withholding entity to declare the sales and adjustments in the VAT return.