FBR rules out tax amnesty scheme for construction sector

ISLAMABAD: The Federal Board of Revenue (FBR) has ruled out the possibility of any fresh Tax Amnesty Scheme for contractors to boost the construction sector, stating that the FBR could not forgo revenue collection of Rs 200 billion on an annual basis.

During the proceedings of the Senate Standing Committee on Finance meeting, it was proposed that the withholding tax on contractors should be slashed from 7.5 percent to 1 percent and a general amnesty scheme should be provided. It was argued that it would give impetus to the construction sector as the government had already announced PM’s Construction Package and asked the IMF for granting it a three months extension.

The Chairman FBR told journalists after the meeting that no such amnesty could be granted to anyone. He said that the FBR was asked to reduce tax on contractors from 7.5 percent to 1 percent but the government could not forego its Rs 200 billion tax amount. The FBR also indicated during the Senate panel meeting that the valuation rates of properties into 23 cities might be revised upwards to collect tax on profit earned upto Rs 5 million within the stipulated time frame of 4 years period at time of disposal of land. The Chairman FBR Asim Ahmed replied that the valuation rate notified by FBR stood at 70 percent of market value.

Earlier, the representatives of Real Estate agents Ahsan Malik and Sardar Tahir had told the meeting that the government changed the gain tax regime to increase the valuation rates notified by FBR and DC rates from July 2021. They also asked for defining 'adventurer' and 'habitual buyers' of real estate into income tax law.

In a related development, the Senate panel rejected FBR’s proposal for imposing a GST rate of 17 percent for jewelers in the budget. The Senate panel asked for increasing the Higher Education Commission’s current budget to Rs 120 billion for the next fiscal year 2021-22. The HEC high ups informed the committee that they have sought the budget of Rs 153 billion for salaries, perks and other administrative expenses of universities, but the Ministry of Finance had directed them to rationalize the expenditures. The HEC rationalized and sent out an amended demand of Rs 120 billion but the government allocated only Rs 66.25 billion leaving the HEC without sufficient funds in the next fiscal year to pay its obligations fully.

Senator Saleem Mandviwalla brought up a complaint before the committee and lamented that an honorable member of this committee owned a cold storage in Peshawar which was raided by FBR’s Customs to seize dry fruits bags. Giving further details, Senator Mohsin Aziz told the committee that his son owned this cold storage and he had rented out the cold storage, but the FBR declared him "as a smuggler" on it's website. Hurt and frustrated over the FBR's attitude and the mudslinging, his son "has abandoned the business."The chairman asked the FBR as to how the owner of the cold storage could be declared a smuggler if the duty of the consignment lying in the cold storage was paid or not. The Chairman of the standing committee directed the FBR to furnish a detailed report before the committee within 15 days.

The Senate panel also rejected the FBR proposal for imposing tax on domestic electricity bills exceeding Rs 25,000 per month. The FBR explained that this tax would be imposed on those not on the Active Taxpayer List. The committee also turned down the FBR proposal to place sugar into the third schedule and impose 17 percent GST. On the recommendations of the Senate panel, the National Tariff Commission agreed to provide relief on those imported tariff lines where the cascading effects were not implemented in true letter and spirit so it was suggested to removed the arising anomaly.