Construction sector suffering

[Salman]

Construction sector suffering


KARACHI: The construction and materials sector is indirectly suffering from irregular supply of utilities and its rising tariffs. If the general sales tax (GST) is imposed, it would prove as the last nail in the coffin for this sector.

Association of Builders and Developers (ABAD) Chairman Mohsin Shiekhani talking to Daily Times said about 70 industries are attached to the construction sector directly and indirectly.

The construction industries are facing several energy-related problems. Irregular supply of utilities and rising tariffs to these industries would ultimately hit the construction and materials sector hard.

He said this sector already pays a heavy amount in sales tax at the time of purchasing the ingredients required in construction.

He said the construction sector transfers just the title of the immovable property to the final consumer and no immovable property comes under the definition of ‘goods’ under the Sale of Goods Act.

He said imposing sales tax to such transactions is transferred to the end consumer and becomes too costly to afford by the general public. “Sindh governor had assured ABAD that sales tax would not be imposed on builders and developers and would soon be removed but still no action has been taken and the matter is pending due to recent political situation.”

ABAD Southern Region Chairman M Saleem Kassim Patel said, “No country in the world imposes tax on any immovable property.” He said the Sindh government in the budget 2011 has levied sales tax on various sectors described as service providers and Sindh Sales Tax on Services Act 2011 was legislated but builders and developers are not service providers.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Standing Committee for Real Estate Chairman Munir Sultan said the construction sector already pays Capital Value Tax (CVT), town tax, stamp duty and station charges, now imposition of sales tax to builders would create trouble for the industry to survive.

“Construction is the mother industry as it provides employment to a number of people.”

Such higher costs would make the product unaffordable and finally force the end consumer to fulfil his housing requirements by negative sources. “It may raise the crime rate also,” he added. He said, “Earlier total cost of construction was equally divided into three large segments, namely land, construction, and profit and tax. Now higher costs have made construction cost 55 percent, cost of land 35 percent and only 15 percent for profit out of the total cost.” staff report