PM Construction Industry package: A great breakthrough

Never in the history of Pakistan has any government shown such magnanimity to Builders and Developers as has been done by PTI government. Prime Minister Imran won elections primarily on two counts, firstly to do away with corruption and bring looted money back to improve the condition of poor people secondly to provide cheap houses by introducing low cost housing schemes under Naya Pakistan Housing Authority. It was very gigantic task as the government was under pressure due to financial constraints therefore decided to invite investors to invest in construction projects without questioning the source of money. Certainly it was very bold initiative that would have meant to convert black money in to white. Seeing the poor response he decided to give more incentives
The main purpose of major concessions was to revive the construction industry that had rendered millions of labour throughout Pakistan. Revival also meant activation of around 70 other construction related industries that were forced to close down due to lock down. Amid Covid-19 situation when the economy is in recession throughout the world the government initiative to open up construction industry and give them concession and tax relief was hailed by economic experts. This also attracted new investors to invest in construction industry with such huge concessions. The chairman ABAD also welcomed the government’s package for the construction industry and appreciated governments gesture declaring construction sector as industry, and this step will boost the ailing economy of the country. The prime minister announced following concessions
a. All the people investing in the construction sector this year will not be questioned about their source of income
b. The tax rate will be fixed for the construction sector, and constructors will be charged tax per square foot or square yard
c. The tax rate will be fixed for the construction sector, and constructors will be charged tax per square foot or so
d. People carrying out construction in the Naya Pakistan Housing Scheme for the poor will only have to pay 10 percent of the fixed tax.
e. Withholding tax will be waived off for all construction sectors except the formal sectors of steel and cement
f. Sales tax will be reduced in consultations with provinces
g. Family selling their house will not have to pay any capital gain tax
h. A subsidy of Rs30 billion to be given for the Naya Pakistan Housing Scheme Construction sector to be given the status of an industry
i. Construction Industry Development Board to be set to support the sector
FBR further announced Fixed Tax Regime for Builders and Developers as under
= Tax liability to be computed on the basis of square feet/yard, to be paid in quarterly instalments.
= New projects, as well as existing incomplete projects, can opt for the scheme up to 31.12.2020.
= The existing incomplete projects have to self-declare the percentage of completion of the project on the relevant date.
= Projects must be completed by 30 September, 2022.
= Exemption from requirement of withholding tax on the purchase of building material except for cement and steel.
= Exemption from requirement of withholding tax on acquisition of services relating to construction except those from companies.
= Permission to incorporate ten times of fixed tax paid as income in the books of accounts.
= 90% reduction in fixed tax liability for low-cost housing.
= Dividend paid by builder or developer companies shall not be liable to tax and there shall be no withholding on the payment of these dividends.
Apart from this long outstanding demand of industrialist to cut down the power tariff has been approved by the Prime Minister Imran Khan and he announced a relief package for industrial sector with 50 percent reduction in rate of commercial electricity on additional usage by Small and Medium Enterprises. While announcing this relief he said that the package would promote industries in the country that suffered losses in the past due to high cost of electricity. He further added that for next three years, all industries on additional usage of electricity would be provided 25 percent relief considering their previous bills. A very big concession doing away with peak hour’s system for commercial electricity users, with provision of uniform electricity rates round the clock. He pointed out that that with 25 percent expensive electricity rates, Pakistan lagged behind India and Bangladesh in terms of exports. He made a special mention and regretted that the contracts signed with power generation companies during previous tenures resulted in production of high-cost electricity, which remained unaffordable for industrial sector. Due to high cost of electricity the country’s exports dipped from Rs 25 billion to Rs 20 billion as many industries were shut down due to unaffordable high tariff. He expressed satisfaction that Pakistan ranked high among the countries of sub-continent in growth of exports during the pandemic of COVID-19, duly praised by Chairman WHO. In view of the second wave of corona virus, the Prime Minister appealed to the nation to observe safety precautions, the way the whole nation fought the COVID-19 pandemic, early opening of businesses and the construction industry, and the policy of smart lock down which helped check the spread of corona virus and death rate, pushed the wheel of economy running in Pakistan earlier than various countries. Lastly it is suggested that a representative of ABAD may be appointed as advisor to avoid delay that occur due to red tapism.