Summary
- The SHC has begun hearing a case that is really a challenge to the Federal Excise Duty FED imposed through the Finance Act 2024 on the transfer and allotment of commercial and residential properties, wherein notices have been issued to the FBR to respond to.
- As per the regulations, FED would be collected by developers and builders at the time of allotment or transfer of commercial properties or the first transfer of open plots or residential properties.
- The review by SHC of this case will decide the future enforcement of FED on the transfer of properties in the province.
The SHC has begun hearing a case that is really a challenge to the Federal Excise Duty FED imposed through the Finance Act 2024 on the transfer and allotment of commercial and residential properties, wherein notices have been issued to the FBR to respond to. A core aspect of this challenge lies in the legality relating to the imposition of FED on immovable properties within the provincial jurisdictions.
As per the regulations, FED would be collected by developers and builders at the time of allotment or transfer of commercial properties or the first transfer of open plots or residential properties. In the case of the buyer, the rates are charged differently based on tax status. For active taxpayers listed under section 181A of the Income Tax Ordinance, the FED is allocated at 3% of the total amount. For a taxpayer who has not filed an income tax return before the deadline, it is 5%, and for non-active taxpayers, it shoots up to 7%.
The collected FED shall be remitted to the federal government, on the same day through computerized receipt of payment or SWAPS payment receipt, according to Form “A” of the FBR’s notice. Developers or builders shall further submit a monthly statement of these transactions in Form “B.”.
In cases where the duty has not been paid or has been underpaid, officials from FBR Inland Revenue can recover the amount due along with default surcharge. The developer or builder shall be liable for default surcharge even though it is discovered that the buyer has subsequently paid the duty since he had failed to collect it in the first instance.
The FBR clarified that the term “developer” refers to those individuals who carry on land development for residential or commercial plots, including housing societies and development authorities. “Builder” refers to those people involved in the construction of residential or commercial buildings for sale, which equally encompasses similar entities.
The review by SHC of this case will decide the future enforcement of FED on the transfer of properties in the province.
