Pakistan – Zero rated and reduced sales tax rate for contractors: scheme notified

On 5 October 2016, through Notification No. SO (TAX)5-24/2016, the Punjab Revenue Authority (PRA) implemented a concessionary scheme of zero rated and reduced sales tax rate on services provided by contractors engaged in civil works. Instead of a 16% sales tax rate on government civil works, the following will apply:

0% rate imposed on ongoing development schemes and projects finalized on 1 July 2016; and
1% rate charged on new development schemes and projects.

The services described under the scheme include:

construction services; and
services provided by contractors of the following:

building (including water supply, gas supply and sanitary works);
roads and bridges;
electrical and mechanical works (including air conditioning);
horticultural works; and
multi-discipline works (including turn-key projects).

The scheme will be subject to the following conditions and restrictions:

it will be available only to the service providers registered with the PRA;
it will be restricted to the turnover related to the government civil works;
no refund of tax will be admissible;
no input tax credit or adjustment or deduction will be allowed;
the service providers must not involved in any form of tax fraud;
it will be available as an option until 31 December 2016; and
it will only be applicable for the period 1 July 2016 to 30 June 2017.

Comments are closed.