Commercial property rent in Punjab: CAP concerned over imposition of 16pc ST

LAHORE: The Chainstore Association of Pakistan (CAP), the leading representative body for the organized retail sector, has expressed deep concern over the imposition of a 16% sales tax on the rental of commercial properties in Punjab under the recently enacted Punjab Finance Act, 2025. The association warns that this new tax regime will significantly raise the cost of doing business and worsen an already fragile investment climate.

Rana Tariq Mehboob, Patron-in-Chief of the Chain store Association of Pakistan, strongly criticized the imposition of a 16% sales tax on commercial property rent, calling it economically unsound and legally indefensible. He emphasized that the global tax models Pakistan claims to follow do not treat rental property as a taxable service, and such a move introduces serious implementation and legal challenges.

“Renting commercial space in Punjab has just become prohibitively expensive,” he stated. “This tax places an unsustainable burden on already struggling retailers and entrepreneurs at a time when economic activity is under immense pressure. Instead of encouraging growth and formalization, such punitive measures risk driving legitimate, tax-compliant businesses into the informal sector.”

He urged the government to reconsider this policy in favour of more balanced, transparent, and business-friendly reforms that promote investment, stability, and long-term economic resilience.

Asfandyar Farrukh, Chairman of the Chainstore Association of Pakistan, echoed these concerns and highlighted the broader implications of such taxation policies on Pakistan’s economic outlook.

“We are witnessing an erosion of business confidence across the retail sector,” he remarked. “The introduction of a 16% sales tax on rental spaces is not just a financial blow — it is a signal that doing business is becoming increasingly unpredictable and risk-laden. He further emphasized that imposing additional taxes without proper consultation or impact analysis could lead to contraction in the formal retail sector, job losses, and decline in investor interest, both local and international.

CAP warned that the current approach undermines the government’s own stated objectives of economic revival, export enhancement, and broadening the tax base through inclusive policies. The Chainstore Association of Pakistan strongly urges the Punjab Government to immediately suspend the 16% sales tax on commercial rentals and engage in constructive dialogue with all stakeholders to develop business friendly and growth-oriented policies.

Copyright Business Recorder, 2025