Sales tax on services exempted on construction services

LAHORE: Punjab Revenue Authority (PRA) has exempted the sales tax on services rendered by construction industry till June 30, 2020.

The provincial authority issued a notification dated April 02, 2020 and allowed zero percent sales tax on services provided by construction sector for next three months.

However, this exemption from tax is available with condition that no input tax adjustment will be granted.

Previously, the industry was allowed reduced rate of five percent and one percent without input tax credit/adjustment in respect of government civil works and sixteen percent with input tax credit/adjustment for others.

The tax is payable within the provincial jurisdiction by construction services and services provided by contractors of building (including water supply, gas supply and sanitary works), roads and bridges, electrical and mechanical works (including air conditioning), horticultural works, multi-discipline works (including turn-key projects) and similar other works but, excluding:

(i) where the tax is otherwise paid by registered persons as property developers, builders or promoters for building construction; or

(ii) where the construction work is funded under an agreement of foreign grant-in-aid or involves construction of consular buildings; or

(iii) residential construction projects where the covered area does not exceed 10,000 square feet for a house and 20,000 square feet for an apartment except where construction services are provided to construct more than one house or more than one apartment building.

Explanation- Notwithstanding the rate of five percent fixed in column 4, the following further reduced rates shall be applicable:

(a) one per cent for all services specified at S.No.14 without input tax credit or adjustment to the extent of Government civil works including those of cantonment boards involved in the ongoing development schemes and projects launched during Financial Year 2016-17 and funded under the Annual Development Plan of the Punjab Government or funded through foreign loans where the negotiations were finalized after 1st of July 2016 or funded under Public Sector Development Program of the Federal Government or funded by the Cantonment Boards; and

(b) zero per cent for all services specified at S.No.14 without input tax credit/adjustment to the extent of Government civil works including those of cantonment boards involved in the ongoing development schemes and projects launched prior to Financial Year 2016-2017 and funded under the Annual Development Plan of the Punjab Government or funded through foreign loans where the negotiations were finalized as on 1st of July 2016 or funded under Public Sector Development Program of the Federal Government or funded by Cantonment Boards.

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