A Fixed Income Tax Scheme for Small Builders and Other Service Providers

To bring small builders, retailers, and other service providers into the tax net, the government has proposed a fixed income tax scheme in the new budget. To deal with the current economic crisis, like bringing down the budget deficit, the government is mulling over different proposals to raise tax rates for filers and non-filers, imposing taxes on retailers, builders, real estate brokers etc. All these efforts have been made to increase tax collection to reach the revenue target of Rs7 trillion in the next budget.

Recently, the government has introduced a fixed income tax scheme for small builders through an amended Finance Bill 2022. A small builder is someone having four residential plots and two commercial plots for building in a year. It has been observed that builders constructed houses for sale but did not come under the tax net. Under this scheme, there will be three categories for the small builders.

• The first category will be for the cities Lahore, Karachi, and Islamabad – which will have a higher rate of Rs 1,000 per sq. ft.
• The second category will be Peshawar, Abbottabad, Multan, Faisalabad, Rawalpindi, Sahiwal, and Gujranwala, which will be charged a lower rate of Rs 300 per sq. ft.
• The third category will be for the remaining cities and have the rate of Rs 150 per sq. ft

Moreover, the government plans to introduce fixed tax rates ranging between Rs20,000 and Rs100,000 per annum, depending on the nature of professional services and their potential. These sectors include real estate brokers, car dealers, restaurants, salons and other professional services providers such as doctors, engineers, lawyers, and chartered accountants.

Furthermore, the government is also planning to impose a tax on small shop owners and big retailers to bring them under the tax net. In this context, the government has announced a new scheme under which a small shop owner would have to pay a fixed tax of Rs3,000 monthly and big retailers Rs10,000. The gold retailers with 300 square feet or fewer shops would have to pay a fixed income and sales tax of Rs40,000. There are around nine million retail shops in Pakistan, and the government wants to bring at least 2.5 to three million of them into the tax net.