The Federal Tax Ombudsman (FTO) has proposed the Federal Board of Revenue (FBR) to define property developer, property promoter, and builder in the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 to collect sales tax on services rendered by property developers and promoter in Islamabad Capital Territory.
The FBR has received the budget proposals of the FTO office for the next fiscal year (2023-24) for the collection of sales tax from real estate projects in the federal capital.
The services of property developers and promoters in Islamabad Capital Territory involve huge sales tax potential due to a boom in the real estate sector during the last 4 years wherein several residential and commercial projects have been launched by renowned property developers and promoters.
However, the term “property developer and promoter” and builder has not been defined under the Ordinance. As per section 2 of this Ordinance, the terms used herein but not defined shall have the same meaning as defined under the Sales Tax Act, 1990.
But the terms property developer and promoter or builder have also not been defined under the Sales Tax Act, 1990. This has created a serious loophole in the assessment and collection of sales tax on these services. Resultantly, the cases which are being framed are weak and have a high chance of getting vacated at higher legal fora.
The terms of property developer, property promoter, and builder may be defined under section 2 of the Ordinance. Builder means and includes any person or AOP or company who develops his own land for sale to the general or specific public or constructs residential or commercial projects and sells it to the general public or specific public whether on installment or cash basis.
Property or land developer means and includes a person whether an individual or AOP or a company who develops or improves land for sale to the general public or constructs a building, whether residential or commercial on his own land or purchases land in his name and develops it for sale to general to the general public or specific public on installments basis or cash basis whatever the case may be.
Property promoter means and includes a person whether an individual or AOP or a company who is involved in marketing of a real estate project whether residential or commercial and receives remuneration or fee or commission against marketing and promotion of the project, FTO said.