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The govt of Pakistan is considering giving 3-6 months extension in Prime Minister Imran Khan’s tax amnesty scheme for the construction sector.
The scheme is going to expire on tomorrow.
According to State Bank of Pakistan, on the back of the government housing package, strong construction momentum drove up cement sales to record levels in Q1 FY21.
The deliberations to extend the scheme have been taking place for quite some time as so far over 350 projects having an estimated cost of Rs140 billion are registered under the scheme.
According to The Express Tribune , The PM’s Office has directed the Federal Board of Revenue to prepare draft of a presidential ordinance to further extend the tax amnesty scheme, sources told.
Govt would decide about the extension after the endorsement of International Monetary Fund.
The PM had announced his government’s second tax amnesty scheme, allowing people to invest in the construction sector without disclosing the source of income. The construction sector is the flagship project of the PM and he is betting on its revival for a surge in the economic activities.
The scheme was also offered on projects that were under construction even before the announcement of the scheme. The condition was that the new as well as the ongoing project has to be largely completed by September 30, 2022, according to the existing law.
The government first promulgated a presidential ordinance in April then gave a permanent legal cover to the scheme by making it part of the Finance Bill 2020.
The sources said that the government was considering extending the date to start a construction project from December 2020 to March 31, 2021. In this scenario, the completion period of the project may also be extended to end December 2022 from the current end September 2022.
The second option was to extend the deadline from December 2020 to June 2021 – an extension of six months. “In this scenario, the completion period of a project may be extended to March 2023,” said the sources to the Express Tribune.
The government will have to amend the Income Tax Ordinance to extend the scheme, either through promulgating an ordinance or through a regular Finance Bill.
In case of a builder, the project shall be treated as complete on the date of completion of the grey structure. In the case of a developer, the project shall be treated as complete on the date on which at least 50% of the total plots have been booked in the name of the buyers; at least 40% of the sale proceeds have been received; landscaping has been completed; and at least 50% of the roads have been laid up to sub-grade level as certified by the approving authority or NESPAK.
This shows that all these projections will be given tax benefits without ensuring 100% completion.
The government has introduced a nominal fixed income tax rate for these wealthy builders and developers. The fixed tax is further reduced by 90% in the case of low cost housing developed or approved by the Naya Pakistan Housing and Development Authority or under the Ehsaas Programme, according to the FBR.
Builders and developers opting for the proposed scheme are not required to withhold income tax on the purchase of building material except steel and cement.
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