ISLAMABAD: As many as 1,083 projects worth Rs340 billion have been registered with the Federal Board of Revenue (FBR) along with another 292 tentative projects with an indicative investment of Rs43bn under the prime minister’s package for the construction industry.
About 3,851 buyers had shown interest in purchasing properties by availing tax incentives for the construction sector till May 6.
The builders and developers are required to get registered on computer-based IRIS software of the FBR on or before June 30 this year and the projects should be completed before Sept 30, 2023.
Prime Minister Imran Khan had announced the package for the construction industry in April 2019. The amnesty scheme that had been offered till December 2020 was later extended for another six months to facilitate those intending to invest their untaxed money in the construction projects.
Tax officials believe IMF may not allow another extension in amnesty scheme for non-disclosure of sources of income
The facility of non-disclosure of sources of income has been extended till June 2021 and the amnesty scheme till Dec 2021 to avail the fixed tax regimes for the construction sector.
Tax officials believe builders and developers have a number of indicative projects, which are still in the process of preparation.
As the International Monetary Fund had already given waiver to the government on several other tax initiatives due to the impact of Covid-19, officials believe the IMF might not allow another extension until December 31, 2021 for non-disclosure of sources of income.
The amnesty scheme generated economic activities in the country as production of the allied industries had posted growth during the past nine months. The data compiled by the Pakistan Bureau of Statistics (PBS) showed that the cement output grew by 57.24 per cent during this period due to greater demand after the start of construction activities and increase in exports. In the steel sector, the production of billets and ingots grew by 57.65pc. The production of paints and varnishes was up 76.28pc. Similarly, other industries showed positive trends in their production.
The break-up of data until May 6 shows that 1,083 projects with an estimated cost of Rs340bn were registered on a permanent basis with the FBR by fulfilling all requirements, including registration of taxpayers.
A bulk of 292 projects with an indicative investment of Rs43bn is in draft stages. According to the officials, these are mere drafts that are at different stages of preparation and approval.
The break-up of buyers’ category shows that only 162 individuals have been registered with the FBR to avail of the scheme involving Rs17bn showing interest to buy properties from builders and developers.
About 3,689 individuals, who had prepared their drafts with an investment of Rs25bn till May 6, were in different stages of preparations.
According to the FBR, the prime minister’s construction package for builders and developers is “in full swing”. The package was promulgated through the Tax Laws (Amendment) Ordinance, 2020, whereby a new Section 100-D and Eleventh Schedule were inserted in the Income Tax Ordinance, 2001. It was extended through another ordinance. The package is very vast in scope and offers attractive tax incentives.
The package is applicable to both the builders and developers and covers both the new and existing construction and development projects. Builders and developers can avail tax benefits in respect of residential as well as commercial buildings.
It can be availed by individuals, associations of persons and companies, irrespective of the entity status. The package provides fixed tax rates on the basis of per square foot or yard for builders and developers.
The tax so calculated is reduced by 90pc in case of low-cost housing projects. Also, in order to facilitate the shareholders of limited companies, the dividend income of the shareholders has been made tax-free. The package also provides many concessions from withholding taxes.
In order to mobilise investment, a complete immunity from probe into the sources of investment has been provided to the builders/developers and to the buyers of the properties of such projects subject to fulfillment of certain conditions.
Published in Dawn, May 12th, 2021