LAHORE: The Punjab government is planning to introduce uniform stamp duty and mutation fee rates for rural and urban properties, and revise its rates to balance the considerations of higher economic activity with those of higher tax collection.

This was a part of the Revenue Mobilisation Strategy and Plan for fiscal years 2023/24-2025/26, formulated by the Punjab Finance Department. Stamp duty is charged by the Punjab government on a variety of legal documents, including the transfer of an immovable property, which constitutes the most important source of stamp duty for the government, while mutation fee is levied on certain transfers of immovable property.

The document noted that before Covid-19, the rate of the stamp duty in urban areas was higher than rural areas; however, during the second half of FY20 in the wake of Covid-19, the rate for urban areas was reduced from five percent to one percent which was recently increased to two percent with effect from FY23.

In comparison, stamp duty rates in rural areas and mutation fee, which is applicable only in rural areas, remained at three percent.

It further noted that the transaction cost for the transfer of immovable property should be the same throughout the province regardless of the area where the transaction is taking place. Hence, going forward, the government would align the rates of stamp duty and mutation fee throughout the province.

The document observed that the recent figures show that the decline in revenue from stamp duty during FY2l was not as significant in the aftermath of rate reduction, as the reduction was largely offset by the increase in the number of transactions.

The figures suggested that the sharp increase in the number of transactions during FY21 can be attributed to a combination of factors including a reduction in stamp duty rate, less-than-expected damage caused to the economy by Covid-19 and the incentives created by the tax amnesty scheme announced by the Federal government in respect of real estate investments.

“Hence, the highest potential for collection of stamp duty lies in the transactions pertaining to the transfer of immovable property. However, a high rate of stamp duty could discourage transactions involving transfers of immovable property.

Thus, the government intends to optimise stamp duty collection by applying it universally on all transfers of immovable property and by calibrating its rate in a manner that balances the considerations of revenue collection with those of higher economic activity,” it added.

Copyright Business Recorder, 2023