New federal excise duty on property transactions announced by FBR

ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a new Federal Excise Duty (FED) on property transactions, effective immediately. Under the updated Federal Excise Act 2005, a 3 percent FED will be applied to the allotment or transfer of commercial properties and the first allotment or first transfer of open plots or residential properties, provided the buyer is listed on the active taxpayer list (ATL).

According to the revised legislation issued on Wednesday, the duty will be 3 percent of the gross amount of consideration involved if the buyer is on the ATL as per Section 181A of the Income Tax Ordinance, 2001, at the time of property acquisition. If the buyer has not filed their income tax return by the due date, the duty rate will increase to 5 percent. In cases where the buyer is not listed on the ATL, the duty will be 7 percent.

The FBR has updated the Sales Tax Act, 1990, and the Federal Excise Act 2005 through amendments made in the Finance Act 2024, which are valid until June 30, 2024.

The revised Federal Excise Act also introduces stringent measures against retailers who sell cigarette packs without proper tax stamps or affix counterfeit stamps. Such retail outlets may face closure as per the prescribed procedures.

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Additionally, the updated Sales Tax Act now includes a new definition of “tax fraud,” encompassing intentional understatement of tax liability or overstatement of tax credits and refunds through false documentation or withholding accurate information. To address these issues, the FBR has established a Tax Fraud Investigation Wing-Inland Revenue. This unit will focus on detecting, analyzing, investigating, combating, and preventing tax fraud and will include various specialized units.

The revised Sales Tax Act also allows the FBR to mandate integration of electronic invoicing systems with the Board’s computerized system for real-time sales reporting, as specified through official notifications.