ISLAMABAD: The government has prepared a simple fixed tax scheme for the developers and builders of the real estate sector and the Federal Board of Revenue (FBR) will launch it in the next week.
According to the documents available with Daily Jang, Rs210 per square foot tax will be imposed on the builders and developers for construction of commercial buildings across the country. However, the rates for construction of residential buildings will vary from city to city. According to the documents, 90 percent waiver would be given on construction of low cost housing schemes.
A central plan of action would be introduced for the beneficiaries of this scheme and it would be linked with the FBR through an automated system. The system of filing tax returns would be simplified and the evaluation of the project would be made through the estimated cost of the project and the tax would be imposed accordingly. A committee would also be constituted to hammer out disputes. A certificate from the Nespak would be mandatory and the covered area and layout plan of the project would have to be furnished. A project covering less than 5,000 square feet would be exempt from these requirements. The builders and developers will have to file tax returns as per Builders or Developers Special Procedure Rules 2019. The rules would apply to all individual developers, builders, association of persons and real estate companies. According to the rules, the projects’ timeline would be three years and permission would be sought from the FBR for projects exceeding three years. The beneficiaries [of this scheme] will not be entitled to file adjustment claims of withholding tax. All the builders and developers of real estate sector would get them registered with the FBR through its IRIS system.
Meanwhile, in a confidence-building measure, the Federal Board of Revenue (FBR) issued a Sales Tax General Order (GSTO), assuring traders that there would be no bar on the seller to ensure that the buyer is providing them with correct CNIC information. The sellers were afraid that the Board might move against them if the buyer provided wrong CNIC information and they filed it in the Sales Tax Returns. The order said the seller should incorporate CNIC information in its sales tax returns in good faith and the FBR will not take action. A senior FBR official said the tax machinery would identify Benami purchasers and the seller would not be burdened in any way to this effect. “We have assured the sellers that the FBR will not harass anyone unnecessarily,” added the official.
The FBR has said it has issued the Sales Tax General Order No. 106/2019 in view of the problems reported by the registered persons in ensuring proper identity of the buyer to fulfill the requirements of reporting NTN/NIC of the buyer in terms of Section 23 of the Sales Tax Act, 1990, it is directed that the NIC/NTN of the buyer with respect to taxable supplies to an unregistered person shall be deemed to have been reported in good faith by the supplier provided that the tax invoice complies with the requirements of Section 23 (b) of the Act and the payments made by or on behalf of the unregistered purchaser of the amount of the tax invoice, inclusive of sales tax and applicable further tax is deposited into the suppliers declared business account.
Moreover, the NIC provided by the purchaser would be authenticated by the Nadra. The order further states that the NIC/NTN provided must not be that of the employee of the seller or his associates as defined under Income Tax Ordinance, 2001. In this regard, the issuance of a Show Cause Notice to a registered person being a seller on account of any issue arising out of the purchaser's NIC shall not be made without prior approval of Member IR, FBR after providing him an opportunity to be heard, the GSTO concluded.