Construction projects behind target
The government had expected that projects of over Rs1 trillion would be registered till December last year. PHOTO: FILE
Over 1,000 construction projects worth Rs355 billion have so far been registered during the first year of Prime Minister Imran Khan’s second tax amnesty scheme, as the government protects income tax exemptions of the real estate sector investors for three more years.
There has been a steady increase in the number of schemes being registered under the tax amnesty scheme but the figure still remains below the government target, suggested the government’s statistics.
So far, 1,016 projects worth Rs355 billion have been registered under the scheme, according to the government’s statistics. These included 274 projects that were already under implementation before the announcement of the amnesty a year ago and a reason for giving the amnesty.
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In April last year, Prime Minister Imran Khan had announced his government’s second tax amnesty scheme for ten months aimed at ‘boosting economic growth’ and minimizing the impact of the COVID-19 on the lives of the people.
The scheme allows people to invest in the construction sector without disclosing the source of income. The construction sector is the flagship project of the prime minister and he is betting on its revival for a surge in the economic activities.
The government had expected that over Rs1 trillion projects would be registered till December last year. But the process took longer time and the premier eventually gave six months extension in the scheme.
Out of over 1,000 schemes, an overwhelming majority - 782 - were registered in December, which was the original deadline of the scheme. The second highest number of projects had been registered in October last year - 121.
The scheme was also offered on projects that were under construction even before the announcement of the scheme. The condition was that new as well as the ongoing project has to be largely completed by September 30, 2022 - a deadline that has now been further extended.
The government first promulgated a presidential ordinance in April and then gave a permanent legal cover to the scheme by making it part of the Finance Bill 2020. Another Ordinance has been issued in January to further extend the scheme till June 2021. The government extended the date to start a construction project from December 2020 to June 2021 and the completion period of a project was also further extended.
On a condition of the International Monetary Fund (IMF), the government has withdrawn Rs140 billion worth 75 income tax exemptions. But it has managed to protect the realty sector concessions till 2024 in a bid to boost economic activities.
The government has protected the 50% reduction in tax liability in case of general low-cost housing projects till June 30, 2024. Similarly, 90% reduction in tax liability in case of low-cost housing developed or approved by Naya Pakistan Housing and Development Authority (NAPHDA) or under the Ehsaas Programme is also protected till June 2024.
In addition to 1,016 projects that have so far been registered with the scheme, another 285 schemes amounting to Rs78 billion were under the process of registration, according to the government. These 285 projects have not yet fulfilled all procedural requirements to avail the scheme.
Out of these, majority of 143 schemes worth Rs43 billion are in Punjab followed by 76 schemes having estimated value of Rs18 billion in Sindh. About 57 projects worth Rs17 billion under approval process are located in the Islamabad Capital Territory. There are nine projects that are located in Khyber-Pakhtunkhwa.
The IMF had barred Pakistan from giving further tax amnesty scheme during the currency of the IMF programme after the Pakistan Tehreek-e-Insaf (PTI) government gave a tax amnesty scheme in May 2019 to allow people to declare their ill-gotten and black money.
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The Federal Board of Revenue (FBR) said that the construction sector tax amnesty scheme provides immunity from Section 111 of the ordinance that deals with the disclosure of the source of income. It said that no questions is being asked regarding the nature and the source of funds from investors making capital investment in new construction projects in the form of money or land, either as an individual, as an association of persons or a company.
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.
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.
Published in The Express Tribune, March 28th, 2021.
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