DHA Challenges FED on Property Transfers: IHC Seeks FBR

DHA Challenges (FED) Federal Excise Duty on Property Transfers: IHC Seeks FBR Response

The Islamabad High Court (IHC) has initiated proceedings that could significantly impact the real estate sector in Pakistan. Defence Housing Authority (DHA) Islamabad has filed a petition challenging the legality of the recently imposed Federal Excise Duty (FED) on property transfers. The IHC has issued notices to the Federal Board of Revenue (FBR) and the Attorney General of Pakistan, seeking their responses to this crucial legal challenge.

The Core of the Dispute:

DHA Islamabad’s petition centers on the imposition of FED on the transfer or allotment of immovable properties by developers and builders. The authority argues that this imposition, based on Table-III of the First Schedule of the Federal Excise Act, 2005, is beyond the scope of the Act. A key contention is that the amendment to Table-III lacks a corresponding modification to the charging section of the Act, which defines the goods and services subject to excise duty.

DHA’s Legal Arguments:

DHA Islamabad’s legal counsel asserts that excise duty applies only to goods and services. Immovable property, they argue, does not fall under either category. The petition further challenges the inclusion of property transfers under excise duty, stating that such transactions do not meet the definition of “goods” within the framework of the Federal Excise Act. This directly challenges the vires (legal authority) of Table-III of the First Schedule.

IHC’s Response and Next Steps:

The IHC, recognizing the significance of the challenge to a federal statute, has issued notices to the FBR and other respondents to submit their replies. Furthermore, a notice under Order 27-A of the Civil Procedure Code (CPC) has been sent to the Attorney General of Pakistan to represent the Federation’s interests in the case.

Implications for the Real Estate Sector:

The outcome of this case will have far-reaching implications for the real estate sector in Pakistan. A ruling against the FED imposition could lead to significant tax refunds for developers and buyers, potentially altering the landscape of property transactions. Conversely, upholding the FED could set a precedent for future taxation policies.

What to Watch For:

The IHC’s decision will be closely watched by developers, buyers, and legal experts alike. The court’s ruling will not only clarify the legal interpretation of the Federal Excise Act but also potentially shape future tax policies related to real estate transactions in Pakistan. We will continue to monitor this case and provide updates as they become available.

Ref: https://profit.pakistantoday.com.pk