The cost of new development projects in Punjab has gone up due to the imposition of a 16 percent sales tax on contractors, reported a national daily. This was confirmed by the Punjab Revenue Authority (PRA) Management Chairman Dr Raheel Ahmed Siddiqui who stated that Punjab has issued a notification for the imposition of 16 percent sales effective from July 01, 2016. The step is believed to enhance the tax net.
PRA Additional Commissioner and Spokesperson Shehzad Mehmood Gondal said that Punjab is the only province to impose this tax on contractors, and PRA has served notices to contractors of new civil works (without foreign aid) for payment of 16 percent sales tax. The purpose of the tax, he explained was to document service providers associated with public sector projects.
According to sources, the Ministry of Planning, Development and Reforms has discussed the cost escalation of development projects in Punjab due to the imposition of the 16 percent tax. National Highway Authority (NHA) in the meeting sought more funds from the Planning Commission for development projects due to the imposition of this new tax on contractors. As per FBR sources, the FBR is charging 5 percent reduced rate of sales tax on construction services and 16 percent sales tax on contractual execution of work under Islamabad Capital Territory (Tax on Services) Ordinance 2001.
