The Appellate Tribunal of the Punjab Revenue Authority (PRA) has ruled that the sale of developed plots by real estate developers does not constitute a taxable service under the Punjab Sales Tax on Services Act, 2012, and is therefore not subject to the provincial sales tax of Rs100 per square yard.
According to a news report, the case involved a real estate developer who was issued a show-cause notice for failing to pay sales tax on developed land, as stipulated in Serial No.15 of the Second Schedule to the 2012 Act. The developer argued that sales of immovable property were not taxable services under the provincial law, which applies only to rental or lease arrangements.
The PRA initially rejected this argument, citing that major housing schemes such as DHA and Bahria Town had paid the tax. The Commissioner (Appeals) later upheld that decision, calling the non-payment a “wilful and deliberate violation.”
However, the developer challenged the order before the appellate tribunal. The tribunal, chaired by Bakht Fakhar Bahzad with Accountant Member Kaukab Nazir, reviewed key provisions of the law, including Sections 3, 6, and 10, and found that only leases or licences of immovable property qualify as “economic activity” for tax purposes — not outright sales.
“The department’s contention that services of property developers are taxable by mere listing under Serial No.15 cannot prevail when it conflicts with the charging sections of the Act,” the judgment stated. It added that, in cases of inconsistency, “the operative provisions of the Act must prevail over the Schedule,” citing Supreme Court precedents from 1993 and 2007.
The ruling effectively nullifies the PRA’s show-cause notice, setting aside the earlier orders and marking a significant shift in how property transactions are treated under provincial tax law.
The PRA Tribunal’s judgment departs from multiple earlier tribunal and high court rulings that had upheld the tax department’s interpretation. Experts said the tribunal, for the first time, examined all legal provisions comprehensively and addressed the issue in full detail.
