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Tax on Punjab civil works likely

Tax on Punjab civil works likely

LAHORE: The Punjab Revenue Authority (PRA) is mulling to tap revenue from public civil works of both federal and provincial nature. In the current fiscal year, the Punjab government withdrew an earlier exclusion given to government civil works including those of the cantonment boards from the Punjab Sales Tax on Services Act 2012.

The exclusion, which has been made under the Punjab Finance Act 2016 and is applicable from July 1, 2016, has sparked a ‘debate’ among tax collectors that the government will collect sales tax with 16 per cent ratio from its own civil projects as private contractors and builders hired for civil works will not pay it from their pockets.

Sources close to the development told Dawn that the exemption lifted only in Punjab may not deliver long-term results as the government will soon start facing the heat of increasing expenditures from provincial kitty.

They further added that it is unclear if the federal government’s funded projects can be taxed by the provincial government and whether the federal government will allow the deduction of ST from its projects in the province.

Sources say sales tax may not be imposed on ongoing projects including the Orange Metro Line Train Project, Multan Metro Bus Project, and Lahore Ring Road Southern Loop Section I and II. However, PRA is likely to start deducting ST at source on all new projects sans foreign aid.

A senior government official claims that though the provincial government will have to face more expenditure on such projects, eventually the money will go to the provincial kitty itself.

He says the exclusion will help the government to document service providers associated with public projects and identify their undisclosed private projects.

He says the major objective of the exclusion is to overcome distortions in economy and bring undocumented builders and contractors.

Under the Punjab Finance Act 2016, construction services and services provided by contractors of building in respect of government civil works and of cantonment boards are liable to the charge, levy, collection and payment of Punjab sales tax at 16pc.

At Sr No 14 in column 2 of the Second Schedule to Punjab ST on Services Act 2012, for the existing entry, the following shall be substituted:

“Construction services and services provided by contractors of building (including water supply, gas supply and supply works), roads and bridges, electrical and mechanical works (including air conditioning), horticulture works, multi-discipline works (including turn-key projects) and similar works but:

Excluding: (i) Where the tax in 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 building: 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.”

Courtesy : Dawn News



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