ISSUING AUTHORITY:                   FEDERAL BOARD OF REVENUE

POWERS EXERCISED U/S:             3(2A)(a) OF ICT (Tax on Services) Ordinance, 2001

3(2)(b) of STA, 1990

NOTIFICATION NO:                        SRO. 326(I)/2020

DATE OF ISSUANCE:                       APRIL 2, 2020

EFFECTIVE FROM:                         WITH IMMEDIATE EFFECT (i.e. APRIL 27, 2020)

AMENDMENTS MADE IN:              SRO 495(I)/2016 DATED JULY 4, 2016

 

COMMENTARY:

 

Earlier this month, The Government of Pakistan had announced various incentives in the shapes of reduction or exemption of taxes on construction sector, builders and promotors for revival of the construction industry. Tax Laws (Amendment) Ordinance, 2020 was promulgated on April 17, 2020 which mainly related to changes brought into Income Tax Ordinance, 2001. In line with these announced incentives, amendments in sales tax on services being provincial subject have been made or being made by all the provinces and FBR for Islamabad Capital Territory. This notification has been issued by FBR to bring changes in tax rates under ICT (Tax on Services) Ordinance, 2001 related to construction and real estate sector. Our comments on the same are as follows:

 

  Through this notification, the services which are previously chargeable to sales tax at the rate of 5% subject to the condition that no input tax adjustment or refund shall be admissible are now chargeable to sales tax at the rate of 0% while keeping the condition remains same. Further a new serial number related to low cost housing schemes is added in the table which is also chargeable to tax @ 0%.

 

The services which are now made zero rated are listed below:

 

S.No. Service Description PCT heading Rate + Condition
1 Construction Services, excluding:

i)                    Construction projects (industrial and commercial) of the value (excluding actual and documented cost of land) not exceeding Rs. 50 million per annum.

 

ii)                  The cases where sales tax is otherwise paid as property developers or promoters.

 

iii)                Government civil works including Cantonment Boards.

 

iv)                Construction of industrial zones, consular buildings and other organizations exempt from income tax.

 

v)                  Residential construction projects where the covered area does not exceed 10,000 square feet for houses and 20,000 square feet for apartments

 9824.0000 and

9814.2000

 0% subject to the condition that no input tax adjustment or refund shall be admissible
8 Services provided by property dealers and realtors —- 0% subject to the condition that no input tax adjustment or refund shall be admissible
12 Services provided by property developers and promoters (including allied services) relating to low-cost housing schemes sponsored or approved by NAYA PAKISTAN HOUSING AND DEVELOPMENT AUTHORITY or under Government’s Ehsaas Programme 9807.0000 and respective sub-headings of heading 98.14 0% subject to the condition that no input tax adjustment or refund shall be admissible

 

 

LINK OF DOCUMENT:                   20204271542631325SRO326OF2020DATED27.04.2020–AMENDMENTINICTORDINANCE,2001