Islamabad, Sep 29: Excise Duty on Property Transfers Challenged in Sindh High Court. The Sindh High Court (SHC) has taken up the matter of the Federal Excise Duty (FED) being imposed under the Finance Act 2024 on the allocation or transfer of commercial properties as well as the first allotment or transfer of open plots or residential properties.
The Federal Board of Revenue (FBR) has been notified by SHC to provide feedback on the matter. The FED on immovable properties under provincial authority has been contested in this regard before the SHC.
Forms A and B are the two forms that the FBR has notified. Form-A pertains to the Computerized Payment Receipt (CPR-FE), whereas Form-B covers the specifics of the FED payment on the property, such as the buyer’s name, the property’s location, the area it is in, the consideration they received, and the FED rate or amount paid.
The FBR’s duty collection procedure states that when a developer or builder allots or transfers commercial property, or first allots or transfers open plots or residential property, they are required to collect duty at the rate of three percent of the gross amount of consideration involved, provided that the buyer is listed as an active taxpayer on the Income Tax Ordinance’s section 181A on the date of acquisition.
In the event that the buyer fails to file the income tax return by the deadline indicated in the proviso to rule IA of the Tenth Schedule to the Ordinance, the FED will be five percent of the gross amount of consideration concerned. If the buyer does not show up on the active taxpayer list kept under section 181A of the Ordinance on the date of acquisition of the property, the FED will be 7% of the gross amount of consideration involved.
On the same day, the developer or builder must credit the federal government with the duty they have collected using a computerized payment receipt (CPR) or SWAPS payment receipt (SPR), as outlined in the accompanying Form “A.” A monthly statement in the form of Form “B,” which is attached to these rules, must be provided by the developer or builder to the Commissioner.
The regulations stated that in the event that the developer or builder fails to pay the duty or pays it insufficiently by crediting the federal government, the officer in charge of Inland Revenue under the Act will collect the unpaid duty under section 14 of the Act and the default surcharge under section 8 of the Act on the unpaid or incompletely paid duty for the period starting on the date the duty was due and ending on the date it was paid, according to the FBR.
The developer or builder who failed to collect the duty will not be compensated; instead, they will be required to pay the default surcharge at the rate specified by section 8 of the Act from the date the person failed to collect the duty until the date the duty was paid, the FBR stated. This is in the event that it is determined during the recovery of duty that the person from whom the duty was supposed to be collected has already paid the duty.
The FBR has also been informed that the term “developer” refers to an individual who develops land for the purpose of turning it into residential or commercial plots and selling those plots, which includes housing societies, cooperative societies, a development authority or other comparable organization that develops land for selling as residential or commercial properties.
According to the FBR, a builder is someone who is involved in creating residential or commercial structures for the purpose of selling them. This definition also includes housing societies, cooperative societies, development authorities, and other similar organizations.
