Govt may withdraw FED on property developers, promoters

[Naveed Yaseen]

By Sajid Chaudhry
ISLAMABAD: The federal government is expected to withdraw Federal Excise Duty (FED) imposed in the budget 2008-09 on the property developers and promoters by incorporating suitable amendments in finance bill 2009, official sources told Daily Times on Thursday.

Ministry of Law and Justice has refused to allow federal tax authorities to levy and collect FED from the property developers and promoters, official sources added.

The Ministry has refused to accord approval to the rules for imposition and collection of federal excise duty from the property developers and promoters and has held that this levy falls in provincial jurisdiction not in the federal, official sources added.

The imposition of federal excise duty on development of plots at Rs 100 per square yard and construction of residential and commercial units at Rs 50 per square foot of covered area was considered as a big revenue generation measure in budget. However, due to the lack of proper information on federal and provincial legal jurisdictions the federal government has missed a golden opportunity of generating few billion rupees in the ongoing fiscal year.

The authorities are also of the view that provinces may impose in the next fiscal year 2009-10 the same duty on same pattern as proposed by the federal tax authorities in the federal budget.

The economic managers at the time of the announcement of budget 2008-09 had proposed in the Finance Bill 2008 imposition of withholding tax on the charges received by property developers and promoters.

However, during budget approval process this withholding tax was replaced with federal excise duty and after the budget approval by the Parliament the Finance Act 2008 empowered the federal tax authorities to impose and collect federal excise duty.

According to the Finance Act 2008, the services of property developers and promoters have been subjected to federal excise duty by amendment in First Schedule.

Official sources told for imposition and collection of any new tax measure, relevant rules are required for its scope and applicability and other terms and conditions of the tax measures. To fulfill this condition, the federal tax authorities had forwarded draft rules to the Ministry of Law and Justice for formal approval and legal input.

The Ministry of Law and Justice while examining the legality of this taxation measures has held that federal government cannot tax an economic activity that falls in legal jurisdiction and right of provinces.

Keeping in view this observation made by the Ministry of Law and Justice, the federal tax authorities are expected to propose amendment in the Finance Bill 2009 for withdrawal of federal excise duty imposed on property developers and promoters for development of plots Rs 100 per square yard and construction of residential and commercial units Rs 50 per square foot of covered area.

http://www.dailytimes.com.pk/default.asp...2009_pg5_1