PESHAWAR: The Khyber Pakhtunkhwa government has approved a Rs8 billion tax relief for the construction sector on property transfer, Dawn news reported on Sunday.
Under the tax relief package, 0.5 percent registration fee on deeds and two percent local council tax on the transfer of immovable property had been waived. The province’s construction sector also got a special exclusion from sales tax on services like Punjab’s and a discounted rate of two percent for all other activities under the same head.
The relief package also includes zero percent capital value tax, which is already part of the Finance Act, 2020-21. “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 policy document on this tax relief said, adding that the role of the provincial government in boosting construction sector could be defined in two major areas: property transfer-related transactions and taxes charged from construction-related services.
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 documents said that currently there were multiple modes of property transfer documentation, including two percent stamp duty, 0.5 percent registration fee and two percent local council tax on registered deeds, in both urban and rural areas.
The relief package reviewed those fees and a new construction sector package was proposed. 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 that after 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. During discussion, the local government department raised the issue of the weak financial position of Tehsil Municipal Administrations (TMAs) and insisted that the local council fee should not be completely waived off.
However, it was agreed that out of the proceeds of two percent stamp duty/mutation fee collected by the board of revenue, one percent would be transferred to the local government department on a monthly basis for the salary expenditure of TMAs.
Prior to this, on July 23, Special Assistant to the CM on Local Government (LG) had announced that the provincial government has added a Rs 4 billion package pertaining to taxes. “This includes an exemption of local council tax”, he said. The relief package for the construction industry would remain valid until June 30, 2021.
Additionally, the provincial executive waived off the registration licence fee tax for hotels and restaurants for one year. Sources revealed that this measure would facilitate the revival of the tourism sector, which suffered significantly due to government-imposed lockdown in light of the coronavirus situation. The provincial government has also handed over 85 guest houses of different departments to the Tourism Department.
