KARACHI, June 12 The Sindh and Punjab governments have conditionally supported the federal government move to impose capital gains tax (CGT) on real estate sector provided the existing capital value tax (CVT) is withdrawn on the same.

A senior secretary in Sindh taxation ministry told Dawn that the rate of new tax would be determined after national consensus was achieved as the NWFP and Balochistan were opposing the CGT and were insistent on continuation of CVT, which is charged at two per cent on transfer of property.

The Federal Board of Revenue (FBR) had convened a meeting of all representatives of all provinces in Islamabad this week to seek their views for introducing the new tax on the real estate sector.

The Sindh nominee at the meeting asserted that the value of property was a vital factor in the CGT and powers for assessment of value of the property should not be given to the collectors. He suggested the value should be determined on the basis of market price in a particular area and should be revised every year.

He further proposed that the transfer of property inheritance, distribution of assets of a joint family and small property units (five to eight marlas) should be exempted from the proposed CGT.

The Sindh nominee argued that before levying the new tax the existing levies on transfer of property such as stamp duty, registration fee and municipal taxes should be rationalised.

At present three per cent stamp duty, one per cent registration fee and one to two per cent town tax are being charged on transfer of property.

The Sindh revenue from transfer of property greatly suffered after the levy of two per cent capital value tax (CVT) by the federal government about two years back. The stamp duty collection of the Sindh Board of Revenue suffered over Rs300 million shortfall every year since the CVT was levied on transfer of property.

Raja Mazher, chairman Clifton and Defence United Estate Agents Association, strongly opposed the new levy and said that it would hurt the real estate business.

He said the decision to tax real estate would discourage overseas Pakistanis to own costly homes in the country which would have adverse impact on the flows of remittances.