Sales tax: Builders call for withdrawal

Claim that imposition of levy is illegal since it’s not a service-based industry.

KARACHI: Representatives of the housing and construction sector have called for an immediate withdrawal of sales tax levied on builders and developers under the Sindh Sales Tax on Services Act 2011.

Addressing a press conference on Wednesday, office-bearers of the Association of Builders and Developers of Pakistan (Abad) said construction was not a service-based industry and, therefore, the imposition of sales tax was illegal. “Contractors, consultants, architects and engineers are service-providers, but builders and developers aren’t,” Abad Chairman Mohsin Sheikhani said, while addressing the media.

Stating that Abad was a national-level organisation representing builders and developers of the entire country, Sheikhani said the tax had been imposed only in Sindh. He said builders paid turnover tax on receipts, capital value tax on sale deeds, property tax and town taxes, which amounted to 5-6% of the property value. “Yet, we’re being harassed by tax authorities.”

The federal government had imposed the federal excise duty on the construction industry three years ago. However, it withdrew the duty after Abad lodged a strong protest against the decision.

Abad Chairman (south region) M Saleem Kassim Patel said business activities improved after Ramazan because of a better law and order situation in Karachi. “But such discriminatory measures will lead to the flight of capital from Sindh.” Patel said growth in the construction industry generated business for at least 70 allied industries. “About 90% materials that the construction industry uses are local,” he said, adding that the imposition of sales tax was tantamount to double taxation, as builders paid sales tax when they bought materials and services.

Abad Vice Chairman Arif Siddik said the construction industry was the main source of employment for non-skilled members of the workforce.

Published in The Express Tribune, December 15^th, 2011.