Islamabad, July 7, 2023 – The Federal Board of Revenue (FBR) has recently released the tax rate for construction services rendered within the jurisdiction of Islamabad Capital Territory (ICT).
In an effort to streamline taxation in the construction sector, the FBR has established a standard tax rate of 15 percent for these services.
The tax rate of 15 percent will be applicable to all construction services provided within Islamabad, aiming to ensure tax compliance and generate revenue for the government. This move is part of the government’s ongoing efforts to strengthen the taxation system and promote transparency in the construction industry.
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However, the FBR has also specified certain categories that are exempted from this tax. The exemptions are as follows:
(i) Construction projects, both industrial and commercial, with a value not exceeding Rs. 50 million per annum (excluding the actual and documented cost of land).
(ii) Cases where property developers or promoters have already paid sales tax.
(iii) Government civil works, including those undertaken by Cantonment Boards.
(iv) Construction of industrial zones, consular buildings, and other organizations that are exempt from income tax.
(v) Construction work carried out under international tenders funded by foreign grants-in-aid.
(vi) Residential construction projects where the covered area does not exceed 10,000 square feet for houses and 20,000 square feet for apartments.
These exemptions aim to provide relief to specific segments within the construction sector and ensure that the tax burden remains reasonable and balanced.
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The FBR’s decision to introduce a standard tax rate and provide exemptions aligns with the government’s broader objective of promoting economic growth while maintaining a fair taxation system. By implementing these measures, the authorities seek to encourage investment in the construction sector and boost infrastructure development within Islamabad.
It is important for construction service providers within the jurisdiction of Islamabad to familiarize themselves with the new tax rate and exemptions to ensure compliance with the tax regulations. This will enable businesses to fulfill their tax obligations while taking advantage of the exemptions provided when applicable.
The FBR will continue to monitor the implementation of the tax rate and exemptions in order to ensure a smooth transition and efficient tax collection process in the construction sector.
