PRA Tribunal Exempts Plot Sales from Provincial Sales Tax

LAHORE: The Appellate Tribunal of the Punjab Revenue Authority (PRA) has delivered a landmark ruling, declaring that sales of developed plots by real estate developers do not constitute a taxable service under the Punjab Sales Tax on Services Act, 2012, thereby exempting them from the Rs100 per square yard provincial sales tax.

According to a news report, the case centered on a real estate developer who received a show-cause notice from the PRA for failing to pay sales tax on developed land, as mandated by Serial No.15 of the Second Schedule to the 2012 Act. The developer contended that sales of immovable property fall outside the scope of taxable services, which applies solely to rental or lease arrangements under provincial law.

The PRA initially dismissed this argument, pointing out that major housing schemes like DHA and Bahria Town had complied with the tax. The Commissioner (Appeals) upheld this stance, labeling the non-payment a “willful and deliberate violation.”

The developer escalated the matter to the Appellate Tribunal, chaired by Bakht Fakhar Bahzad with Accountant Member Kaukab Nazir. The tribunal meticulously reviewed Sections 3, 6, and 10 of the Act, concluding that only leases or licences of immovable property qualify as economic activity subject to tax—not outright sales.

“The PRA’s claim that property developers’ services are taxable solely due to Serial No.15 cannot override the charging sections of the Act,” the judgment asserted, emphasizing that in cases of conflict, “the operative provisions of the Act take precedence over the Schedule,” citing Supreme Court precedents from 1993 and 2007.

The ruling nullified the PRA’s show-cause notice, overturned prior orders, and marked a pivotal shift in the taxation of property transactions under provincial law. Departing from previous tribunal and high court decisions that upheld the PRA’s interpretation, the tribunal conducted a comprehensive legal analysis, addressing the issue with unprecedented depth.