FBR Withdraws 5% Tax on Services of Construction

The Federal Revenue Board (FBR) has exempted 5% sales tax on the services of construction/land dealers and will now charge zero percent sales tax on services rendered by property developers and promoters including allied services relating to low-cost housing schemes under Islamabad Capital Territory (ICT) jurisdiction.

The FBR has revised SRO 495(I)/2016 through an SRO 326(I)/2020 under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001.

The FBR will also charge zero percent sales tax on services rendered by real estate developers and promoters (including allied services) related to low-cost housing schemes funded or approved by the Naya Pakistan Housing and Development Authority or under the Ehsaas program of the Government.

Zero percent subject to the condition that no input tax adjustment or refund shall be admissible.

As per the SRO 326(I)/2020 released by the FBR, services rendered by property dealers and realtors under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 will now be subject to zero percent sales tax.

The Capital Value Tax (CVT) levied on some properties by S7 of the Finance Act 1989, through the Amendment Ordinance, S7 (1) of the Finance Act 1989, ceased to have any effect. In other words, it can be said that CVT is no more payable to the federal government.

By amending the Second Schedule of the Punjab Sales Tax on Services Act, 2012 vide Note No SO(TAX)1-110/2020 dated 02 April 2020, the construction services were subject to Punjab Sales Tax at a rate of zero percent without input tax adjustment.

However, the KPRA vide notification No 709-11 dated 07 April 2020 exempted all construction and allied services provided in the Khyber-Pakhtunkhwa from the sales tax levy.

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