Massive sales tax cut for Punjab contractors LAHORE: Punjab is mulling a massive reduction in sales tax on services – from 16 per cent to 1pc – for contractors engaged in public sector development projects across the province and a notification may be issued any time, Dawn has learnt.
The government has been facing stiff resistance from construction companies and individual contractors.
The Punjab Revenue Authority (PRA) has been currently serving notices to contractors of ongoing and new civil works (without foreign aid) for payment of 16pc sales tax from July 1, 2016.
The issue surfaced in June-July 2016 when the contractors engaged in government projects were told to pay the tax from their pockets.
An informed source privy to the development told Dawn on Monday that the government has ‘agreed’ to review its previous decision following a recent meeting of the provincial finance minister with contractors and government departments concerned.
He said that contractors have refused to pay huge amount of tax and warned of discontinuation of work. The heads of departments like Communication and Works, Public Health Engineering, Irrigation, development authorities, also disagreed with the tax which the government would have to pay from its own pocket, thus increasing the cost of each project or work, the source added.
The source said contractors agreed to pay 1pc tax following the meeting.
A PRA official, who wished not to be named, said even with 1pc tax, revenue would be generated for the province and all construction companies and contractors associated with public works would come under the tax net.
He said bringing such contractors into tax net is part of the ongoing tax reforms of the provincial government. He added that contractors working on private projects are already paying 16pc ST on Services.
The official said that 1pc tax – if approved – would be applicable on the Annual Development Programme 2016-17 worth Rs550billion.