The federal government has opted to eliminate the 3 percent Federal Excise Duty (FED) on the initial sale of all properties.
The duty, which included an additional 5 percent tax for non-filers, will be completely removed, according to the Express Tribune. A formal summary to begin the legislative process has already been submitted, and Finance Minister Muhammad Aurangzeb has approved the proposal. The government aims to eliminate the tax by the end of April.
The prime minister’s housing task force had suggested eliminating the FED. Legislation required to formalize its removal will be introduced shortly.
Notably, the FED was first applied to the initial sale of all commercial and residential properties, such as houses, plots, and apartments, with rates of 3 percent for filers, 5 This tax was collected at the time of booking, allotment, or transfer.
The IMF has not yet publicly supported this reversal.
The prime minister’s housing task force also proposed the removal of the deemed income tax on properties. Furthermore, it called for the harmonization of stamp duties across various jurisdictions, the removal of the capital value tax in Islamabad, and the introduction of exemptions for first-time homebuyers as well as low-cost housing initiatives.
The task force also recommended reinstating a slab-based system for capital gains tax and rationalizing taxes on construction materials to lower building costs.
Although the task force advocated for lowering the central bank’s policy rate to single digits to foster real estate growth, both the IMF and the State Bank of Pakistan dismissed the proposal.
The government is also contemplating the elimination of the 10 percent income tax surcharge that is currently imposed on individuals with annual earnings exceeding Rs. 10 million.
