The Federal Cabinet has approved a special package for the construction industry by framing a fixed tax regime for the builders and developers after amending the Income Tax Ordinance 2001.

The approval of the ordinance will ensure legal effect to the incentives package for the construction industry.

Under the ordinance, a fixed tax regime is being introduced for builders and developers. There will be no withholding tax on the constructional material except cement and steel. Provision of services has been exempted from withholding tax.

As per the ordinance, the tax has been reduced by ninety percent for low-cost houses to be constructed under Naya Pakistan Housing Authority.

This incentive package will be applicable for the projects to be initiated before the end of this year as well as the ongoing incomplete projects, which will get themselves registered under this scheme. The builders and developers will have to get their new and ongoing projects registered with Federal Board of Revenue through IRIS web portal.

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One-time exemption has been given on capital gain tax for the house measuring 500 square yards and flat of 4,000 square yards.  The construction industry will be eligible to avail the same kind of facilities available to other industries for the import of plant and machinery.

Advance tax on auction of properties has been reduced to five percent from 10 percent. Sales tax on construction services in the federal capital territory has been brought to zero on the pattern of Punjab. Exemption has also been given on capital value tax in the federal capital territory on the pattern of Punjab and Khyber Pakhtunkhwa.

Now builders and developers will have to pay a fixed tax regime based on per square foot or per square meter. Now builders and developers can claim the credit of profit of as much as ten times against the tax they have paid.

Under this scheme, the companies will exempt taxes on their shareholders.

The government has also reduced advance tax on auction of properties to five percent from 10 percent while sales tax on construction services in Islamabad has been brought to zero on the pattern of Punjab. Exemption has also been given on capital value tax in the federal capital territory on the pattern of Punjab and Khyber-Pakhtunkhwa provinces.

Prime Minister Imran Khan had announced the incentivized package for the construction industry earlier this month in order to increase employment opportunities in the country in the wake of coronavirus outbreak.