PESHAWAR: The Khyber Pakhtunkhwa government has approved a Rs8 billion tax relief for the construction sector on property transfer.

The documents available with Dawn show that under the tax relief package, 0.5 per cent registration fee on deeds and two per cent local council tax on the transfer of immovable property had been waived.

Also, the province’s construction sector has got a special exclusion from sales tax on services like Punjab’s and a discounted rate of two per cent for all other activities under the same head.

The relief package also includes zero per cent capital value tax, which is already part of the Finance Act, 2020-21.

The documents said the government was committed to creating an ease of doing business and encourage the role of the private sector in the economic development of the province, so the development of construction sector is its top priority to accelerate economic growth through employment generation and industrial development.

Govt says relief is on property transfer

“The government intends to harmonise the [construction] sector in a holistic manner by improvising ease of doing business and providing monetary relief through either revising tax or improving tax processes,” a document read.

The document added that the role of the provincial government in boosting construction sector could be defined in two major areas, including property transfer-related transactions and taxes charged from construction-related services.

According to it, it is equally important to simplify processes by removing multiple taxes and instead create a single-window operation with the goal to enhance the ease of doing business for the construction sector.

The document said currently, there were multiple modes of property transfer documentation, including two per cent stamp duty, 0.5 per cent registration fee and two per cent local council tax on registered deed in both urban and rural areas, while on mutation, local council and mutation fee, two per cent in rural areas.

It said on the direction of the prime minister, those fees were reviewed and a new construction sector package was proposed.

For the purpose, proposals adopted by the Punjab government were taken as a baseline and were further improved in the context of KP creating even a more attractive package.

The document said following lengthy deliberations among the relevant government departments, a model for property transfer related taxes were prepared that would not only reduce taxes but also simplify processes.

It said not only would the model reduce the single stamp duty of two per cent as opposed to three fees collected to the amendment but it would promote registered deed within the rural sector as well.

The document said during discussion, the local government department raised the issue of weak financial position of tehsil municipal administrations and insisted that the local council fee should not be completely waived off.

However, it was agreed that out of the proceeds of two per cent stamp duty/mutation fee collected by the board of revenue, one per cent would be transferred to the local government department on a monthly basis for the salary expenditure of TMAs.

Published in Dawn, July 26th, 2020