Confusion over capital gains tax fate hitting both govt and realtors

Source: Published in Business & Economy on Tuesday, July 26, 2016

GUJRAT: The ambiguity over the fate of the Capital Gain Tax (CGT) imposed by the Federal Board of Revenue (FBR) on the sale and purchase of the properties, was causing a sharp decline in the revenue the provincial government and tehsil municipal administrations (TMAs) would earn through taxes on such transactions and real estate business.

According to sources, the FBR move has brought to a grinding halt the routine business at the registration branches as well as computerised land record centers (CLRCs) in the three tehsils of the district for the last three weeks.

Since the FBR on July 1st had notified the imposition of 10 per cent CGT on the 100pc market price of any property sold within five years of the purchase to generate revenue from realtors, after the measure was introduced in the recent budget, both the seller and purchaser have been avoiding to get properties ownerships transferred, causing a sharp decline in the real estate business as well as government revenue.

Few property mutations in Gujrat since FBR measure

Previously the CGT was being charged as per the property evaluation table notified by the district collectors (DCs). The rates of property in the official evaluation table are usually 40pc-60pc lower than the actual market price.

However, in case of Gujrat city and its suburbs, in most of the commercial and some residential areas the property rates in the DC’s evaluation table are much higher than the actual market price.

According to the local real estate agents association, that was already struggling for lowering of these rates, the FBR measure could prove disastrous for their business.

Gujrat is also among the 18 districts which where the real estate associations have demanded the FBR should bring down the ratio of collecting CGT, instead of charging it on 100pc market price of property. They had proposed that if necessary the tax should be enhanced gradually so that their business could survive.

A senior official at the local land revenue department told Dawn that in the first two weeks of July, the registry branches as well as the CLRCs witnessed “zero activity” in terms of mutation of property due to the FBR’s decision.

Even, in the last one week (from 17 to 24 July) only three to four mutations were witnessed per day, he said, adding that before the FBR move there used to be around more than two dozen mutations a day in Gujrat and Kharian tehsils of the district.

He apprehended that if the situation persisted, the provincial government as well as the TMAs could face huge losses in terms of revenue, making it hard for them to achieve their respective revenue targets under this head.

According to him, only Gujrat TMA used to generate around Rs160 million annually, spending the sum on the provision of basic amenities to the citizens.

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Written by Waseem Ashraf Butt

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