Construction sector: FBR may place incentives in Cabinet meeting today for final approval

The Federal Board of Revenue (FBR) has finalised the notification relating to incentives to the construction sector which is likely to be placed in the cabinet meeting on Tuesday (today) for a final approval, said official sources.
The FBR sources said the government had opened a limited window for the construction sector only up to 31st December. They said provinces had already been engaged and two provinces have notified their concessions. Provincial taxes were too high on the construction industry which included CVT/stamp duty, registration fee, and town fee, etc, ranging between 5 to 7 percent.
These provincial taxes and duties are over and above the FBR taxation and the federal government has asked provinces to club all the transfer and registration fee, they added.
According to the sources, the provincial governments would speed up their regulatory approvals, particularly at the level of building control authorities. A maximum of 45 days delay would be acceptable after the passage of which an automatic approval would be deemed legal for the approval of a building plan, they added.
The sources pointed out that the builders and construction companies would be no more withholding agents under the fixed tax regime. However, no such facility has been extended to those dealing with cement and steel suppliers.
Also, the builders and developers would be able to claim a profit not more than 10 percent of the tax paid. Further 90 percent reduction in the fixed tax rate would be extended to the builders operating into the low-cost construction activity under Naya Pakistan Housing Authority.
They said the government would extend permission for construction activities from the 14th April onward and all the safety protocols will be in place before it. They added that the international lending agencies were not agreeing to any such tax concessions before the spread of COVID-19.
Therefore, Prime Minister Imran Khan had himself contacted the IMF chief twice to seek her consent. It was followed by formal approval of the relief package by the National Coordination Committee because the package would be implemented on the ground through provincial governments.
The sources said the facility of not asking about the source of money would only be meant for the buyers of houses, apartments and commercial entities. According to them, there was a demand that there should be no disclosure of the source of financing from those investing for the first time which was a type of amnesty. The government has agreed to this demand under the package.
There are three types of provisions in this regard, including if one makes investment from 14th of April till December 31, 2020 in terms of buying land for construction purposes, or start construction on already available land, no source of investment would be inquired about.
However, this facility would be available up to September 2022 in case one buys a property in an already constructed housing scheme. All such activities will be exempted from section 111 of the Income Tax Ordinance and there would be no need to declare the source of financing on the investment up to December 31, 2020.
They said the only condition to avail the facility is to start the construction activity before December 31, 2020 as this facility would not be applied on those possessing empty plots without a construction activity. The objective is to encourage construction activities in the country, they added.