FED on builders' services being abolished

The government has decided to abolish federal excise duty (FED) on services provided by property developers or promoters through Finance Bill 2011-2012, extending a major tax relief to those engaged in property business. Sources told Business Recorder here on Tuesday that the Federal Board of Revenue (FBR) would amend the First Schedule of the Federal Excise Act 2005 to withdraw the FED levied on services provided by property developers or promoters.
The government has estimated to suffer revenue loss of Rs 50 million during 2011-12. The withdrawal of FED on services provided by property developers or promoters would be a major tax incentive for the real estate sector in the budget for 2011-12. Details of the budget proposals show that the FED was levied on services provided by property developers or promoters @ Rs 100 per square yard on development of purchased or leased land for conversion into residential or commercial plots, and Rs 50 per square foot of covered area in case of construction of residential or commercial units.
The Association of Builders and Developers of Pakistan has informed the Ministry of Finance and the FBR that collection of capital value tax (CVT) has been transferred to the provincial governments. In the presence of CVT, the levy of FED is a huge financial burden. The association requested for withdrawal of federal excise duty. It has been proposed to abolish federal excise duty (FED) on services provided by property developers or promoters keeping in view the hardships of the property developers.
It is important to mention that FED on services provided or rendered by the builders of residential and commercial units for sale and development of residential and commercial plots was levied in budget for 2008-09. The FED was imposed irrespective of the nature of business (whether government employees foundations/societies). All activities of sale/purchase of residential and commercial units and developers of residential and commercial plots were brought within the ambit of this levy. The services of property developers and promoters were subjected to federal excise duty by amendment in First Schedule of the Federal Excise Act. The development of plots was subjected to FED at Rs 100 per square yard and construction of residential and commercial units were subjected to FED at Rs 50 per square foot of covered area. The federal excise duty on services of property developers and builders was levied from July 1, 2008.