KARACHI: The corporate sector was pleased with the promised relief, but the finance minister’s proposals will shoot up the cost of housing.
He reduced the corporate tax by promised one per cent to 31pc. However, the tax measures will hit the construction industry.
The finance minister proposed that in order to simplify taxation, property income has been proposed to be segregated and taxed separately from income under other heads.
“Accordingly separate rates of tax have been proposed,” said the finance minister.
Property dealers were expecting harsh measures because of the perception of big money in this sector.
“The hike in cement price will hit the industry,” said Nishat Ahmed, a leader of property dealers. The government has imposed tax of Rs1 per kg on cement while it was 5pc on retail.
At the same time, taxes for builders and developers have been increased, which will be passed on to commoners who are the ultimate buyers.
“At present, tax collection from builders and land developers does not match the level of profits in the construction business.
“After discussion with Abad, final tax is being imposed on builders and land developers on the basis of per unit area,” said the budget papers.
“All related tax measures will hit the industry and its growth.
“The prices of property, houses and apartments will shoot up, and ultimately the growth of the construction industry will slow down,” said Ashraf Hameed, a leading builder.
Another related industry, marble, which is vastly used by builders for flouring came under taxation.
According to budget papers, the sector has electricity as a major input. In order to bring this sector in the ambit of sales tax, it is proposed to charge sales tax at the rate of Rs1.25 per kWh of electricity consumed.
The proposed tax shall be in addition to standard sales tax at the rate of 17pc on supply of electricity as well as extra tax at the rate of 5pc.
Sales tax on steel sector, including shipbreaking sector, is collected on fixed rate basis. Sales tax from steel melters and re-rollers is collected on the basis of electricity consumption whereas shipbreakers are paying sales tax on ships imported for breaking.
“These rates are proposed to be revised upwards,” said the document.
This measure will increase steel prices and encourage importers who are the sole beneficiary of closure of Pakistan Steel.
However, it will also hit construction industry as iron and steel are the main ingredients for the industry.
Published in Dawn, June 4th, 2016
