SRB starts netting property dealers to realise sales tax potential

KARACHI: The Sindh government has started netting property dealers in order to realise the potential of sales tax in the province, sources said on Saturday.

Property dealers provided services in sale, purchase and rental agreements, bagging huge commissions, but their contribution towards sales tax on services is negligible, they added.

An official at the Sindh Revenue Board (SRB) said notices have been issued to property dealers, providing services in major areas of Karachi, including Defence, Clifton, Gulshan-e-Iqbal, etc.

The official said the property dealers have been asked to get registered with the provincial revenue authority, otherwise they would face punitive action, including imprisonment.

The SRB enhanced the efforts following the changes in the law at the federal level, which resulted in higher declaration of values of immovable properties. The prevailing collector rates for immovable properties notified by the Sindh government are comparatively lower than the valuation table issued by Federal Board of Revenue (FBR) for major cities of Pakistan. It is mandatory for buyers and sellers to pay withholding income tax at the rates notified by the FBR, therefore, most of the transactions are being declared at the FBR valuation. 

The SRB official said that the higher declaration has resulted in additional revenue to Sindh government in terms of property tax and stamp duties. The official further said that the higher declaration also enhanced the commission of property dealers, who provide services at the range of 0.5 percent to 5 percent.

The provincial government imposed sales tax on services provide property dealers effective from July 01, 2014. However, property dealers were less bother to comply with the provincial tax laws.

The SRB official said that now the board had taken serious notice and held meetings with representatives of Defence and Clifton Association Real Estate Agents on January 31, 2017. The meeting agreed that the association would be responsible for registration of its members.

The official said that the SRB would impose penalty of Rs100,000 on  the non-compliant property dealers. In case the taxpayer is remained non-compliant after issuance of notice then, he would be liable to imprisonment for a term of one-year.