The Federal Board of Revenue (FBR) will collect federal excise duty (FED) on all allotments and transfers of commercial and residential plots/buildings from July 1, 2008. Sources told Business Recorder on Wednesday that government foundations and societies engaged in construction of new units for sale to its employees would also be liable to pay FED.
Therefore, construction of units by such government societies for sale to their employees would be covered under FED. Secondly, the FED would not be levied on allotments and transfers of commercial and residential plots and commercial and residential buildings prior to July 1, 2008.
The FED on services provided or rendered by the builders of residential and commercial units for sale and development of residential and commercial plots was levied in budget 2008-09. The FED has been imposed irrespective of the nature of business (whether government employees foundations/societies). All activities of sale/purchase of residential and commercial units and developers of residential and commercial plots fall in the ambit of this levy. It is to clarify that all allotments and transfers made on from July 1, 2008 are chargeable to this levy.
In the budget, the services of property developers and promoters were subjected to federal excise duty by amendment in First Schedule. The development of plots shall be subject to FED at Rs 100 per square yard and construction of residential and commercial units shall be subject to FED at Rs 50 per square foot of covered area. Earlier fixed tax was imposed on builders and developers. This tax was withdrawn as income tax and the Federal Excise duty on services of property developers and builders was levied from July 1 2008.
Experts opined that the transfer of any unit is being done after its allotment to the concerned person. If the levy has been collected at the stage of allotment, then whether the FBR would again charge FED on obtaining possession of the building? The FED has to be collected either at the stage of allotment or transfer of plots/buildings. Prior to the amendment in the Finance Bill 2008-09, developers had to deposit income tax directly from their own pocket.
Income tax was a direct levy whereas excise duty was an indirect tax whose burden has to be passed on to the consumers. Later, an amendment was made in the Finance Act changing the mode of tax collection by charging excise duty from the purchasers instead of levying minimum tax on developers/promoters, expert added. The tax burden has been shifted from developer to purchasers. At the time of sale of such property, excise duty has been included in the price of the unit, which is ultimately paid by the purchaser.