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LAHORE: Housing societies in Punjab are defying registration with the Punjab Revenue Authority (PRA) to avoid sales tax on services, said sources.

According to the sources, most housing societies pay no heed to the registration procedure with the revenue authority in the first place and prefer to challenge the recovery proceedings when the authority compulsorily registers them.

They said the property developers take the plea of non-determination of the nature of services by the authority to defeat the recovery proceedings. However, the authority officials believe that all the housing societies are engaged in providing property developer services, which is taxable under the Punjab Sales Tax on Services Act, 2012.

They said they prefer to register them compulsorily once the property developers fail to register voluntarily. Once a housing society gets the status of the property developer, it is required to pay sales tax on services, they added.

However, the housing societies keep ignoring call-up notices to show cause as to why sales tax cannot be assessed against them along with the default surcharge. They only contest the same if the authority initiates recovery proceedings, added the sources.

It may be noted that the tax consultants also advise them to ignore the notices until the recovery proceedings are initiated against them, which are challenged at the relevant forums to avoid tax liability to the maximum extent. As a result, not only did the authority and taxpayer spend financial resources to prove their viewpoint, but it also led to the wastage of the precious time of the appellant forums.

The sources said the representatives of housing societies do not avail the time and opportunity provided by the assessing officers to make their defence, if any. But they opt not to appear before that forum until the recovery proceedings are initiated.

They said the authority preferred to give sufficient time and opportunity to a taxpayer with a mindset of promoting tax culture in the province. But taxpayers misuse the leniency shown by the authority, leading to undue delays in recovery of due tax.

It is worth noting that the sales tax on services on real estate developing, its developers and promoters was originated in 2013 through a notification made part of the Act duly.

According to the notification, the total area of the land for development or construction purposes would be liable to tax once any development work over the property is carried on.

Copyright Business Recorder, 2023

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