Government to Eliminate Federal Excise Duty on Property Transactions

ISLAMABAD: The government is preparing to eliminate the 3 to 7 percent Federal Excise Duty (FED) imposed on property transfers through the Finance Act, 2024. This move is intended to provide a boost to the real estate sector.

Top officials from the Federal Board of Revenue (FBR) revealed that Prime Minister Shehbaz Sharif has given his approval to remove the FED on property transactions. Consequently, the FBR has submitted a proposal to the federal cabinet for consideration.

The government is considering two options: issuing a Presidential Ordinance or introducing a Bill in Parliament to repeal the Federal Excise Duty (FED) on property transactions.

Sources suggest that the government is likely to introduce a Bill in Parliament to promptly abolish the duty.

Simultaneously, the Computerized Payment Receipt (CPR-FE) for settling the 3-7% FED will also be discontinued for the allocation or transfer of commercial properties, as well as the initial allocation or transfer of open plots or residential properties.

Reports indicate that the tax measure did not yield the anticipated results in the first half of fiscal year 2024-25, generating minimal revenue. The government plans to soon abolish FED on the assignment or conveyance of commercial properties, along with the initial assignment or conveyance of vacant plots or housing properties, according to sources.

The FBR had previously introduced Form-A and Form-B. Form-A pertains to the Computerized Payment Receipt (CPR-FE), while Form-B contains details regarding FED payments on property, including the buyer’s name, property location/area, consideration received, and the FED rate/amount paid.

Currently, every developer or builder is required to collect duty upon the allotment or transfer of commercial property and the initial allotment or transfer of open plots or residential property. The duty is levied at 3 percent of the gross consideration amount when the buyer is listed on the active taxpayer list under Section 181A of the Income Tax Ordinance on the property acquisition date.

The FED is 5 percent of the gross amount of consideration if the buyer has not submitted their income tax return by the specified due date according to Rule IA of the Tenth Schedule to the Ordinance.

Furthermore, the FED is 7 percent of the gross amount of consideration when the buyer is not included on the active taxpayer list under Section 181A of the Ordinance at the time of property acquisition.