The Tax Laws (Amendment) Ordinance, 2020 [the Amendment Ordinance] follows through on the Special Incentive Package announced by the Prime Minister in early April for revival of construction sector in backdrop of deterioration of macroeconomic indicators.
To align with this announcement, the Amendment Ordinance grants status of ‘industry’ to construction sector through suitable amendment in the Income Tax Ordinance, 2001 [the 2001 Ordinance] and offers several time bound tax reliefs to builders and developers who complete their projects by September 2022. Many of these concessions are optional. Those who decide not to opt for the tax rates offered by the newly promulgated Eleventh Schedule may continue to be taxed under normal tax regime. The Amendment Ordinance also grants immunity from probe regarding source of investment, subject to fulfillment of certain conditions, though it is noted that immunity is restricted to the provisions of the 2001 Ordinance and does not cover the Banami Transactions (Prohibition) Act, 2017. The Amendment Ordinance is also silent on any exemptions from sales tax or excise duty on construction material, though this was also part of the package announced by the Prime Minister. There is also no relief from capital gains tax on commercial property or open plots despite announcement to the contrary.
This publication contains an overview of the salient features of the amendments. We recommend that while considering the application of the amendments to any case, reference be made to the specific wordings of the relevant statutes.