Punjab to impose 16% sales tax on commercial property rent

The Punjab government has imposed 16% sales tax on commercial property rent from July 1, 2025 under the Punjab Finance Act 2025.

This tax will be applicable on all “fixed fee invoices” relating to the rent of immovable commercial property. Only residential houses rented out for personal residence are exempted from this tax.

M. Tanveer, patron-in-chief of the United Business Group (UBG), has expressed serious concern over the imposition of a 16% sales tax on commercial property rentals in Punjab.

Renting commercial space in Punjab has just become prohibitively expensive, he said, adding that it would place an unsustainable burden on struggling retailers and entrepreneurs in a situation when economic activity is under immense pressure.

The introduction of a 16% sales tax on rental spaces is not just a financial blow — it is a signal that doing business is becoming increasingly unpredictable and risk-laden, he added.

Since commercial property rent was not included in the exempt list, it is now a taxable service and falls under the jurisdiction of the Punjab Revenue Authority (PRA).

Earlier, only those services that were clearly listed under the Punjab Sales Tax on Services Act 2012 were subject to tax. But under the new law, the concept of “negative list” has been introduced in place of “positive list”. This means that now all services will be considered taxable in themselves, except those that are included as exceptions in the First Schedule.

Therefore, all companies or individuals who issue “fixed fee” or rental invoices for the rental of commercial spaces will now be legally required to collect and remit 16 percent Punjab Sales Tax.