CVT on Islamabad property sales: 2011-12 budget may restore FBR power to impose levy

Finance bill 2011 may restore powers of the Federal Board of Revenue (FBR) to impose capital value tax (CVT) on transfer of immovable property within the jurisdiction of capital territory. Sources told Business Recorder here on Saturday that at present no capital value tax (CVT) is charged on transfer of immovable property within the jurisdiction of federal capital following withdrawal of the CVT on buying and selling of property in capital territory through Finance Act 2010.
The amendment was made in section 7 (levy of tax on capital value of certain assets) of the CVT Act, which transferred the powers to collect the CVT on property to provinces under the 18th Constitutional amendment. Resultantly, the FBR has no authority to collect 4 percent CVT on transaction of immovable property from July 1, 2010 as a result of 18th Constitutional amendment under which imposition of CVT now falls in provincial domain.
The CVT on property is the provincial subject in the aftermath of 18th Constitutional Amendment, so CVT has been transferred to provinces and the FBR does not have authority to collect this tax. At that time, it seemed an omission in the Finance Act 2010, which resulted in withdrawal of the CVT in capital territory because the federal government can legally impose the tax within the jurisdiction of Islamabad.
"If the government wants, Finance bill 2011 can give powers to the FBR to impose CVT within the territorial jurisdiction of capital territory", an official said. According to sources, the federal government can restore the powers of the FBR to collect the CVT on transfer of immovable property within the jurisdiction of capital territory. Since last budget, no CVT was applicable on transfer of immovable property in Islamabad. Finance Act 2010 has withdrawn powers of the FBR for collection of CVT on immovable property. The applicability of the CVT on immovable property was never considered as a revenue generation measure by the FBR.
Through Finance Act 2010, the FBR has made it mandatory for the registrars of the property to submit quarterly statements with the particulars of the buyers and sellers of property in their respective provinces. The data submitted by the property registrars would help in cross matching of information to verify whether the buyers/sellers are within the tax net or not, sources added.