The Punjab government has introduced a significant new tax measure, imposing a 16 percent sales tax on the rental of commercial properties, effective from July 1, 2025. This change comes under a new framework established through the Punjab Finance Act, 2025, which fundamentally alters the province’s sales tax on services regime.
The newly introduced tax will apply to all Fixed Fee Invoices related to the rental of immovable property, with a clear exclusion for personal dwellings rented for residential use.
Shift to “Negative List” Approach
Previously, only services explicitly listed under the Punjab Sales Tax on Services Act, 2012, were subject to taxation (a “positive list” approach). However, the Punjab Finance Act, 2025, marks a pivotal shift to a “negative list” model. This means that, by default, all services are now considered taxable unless they are specifically exempted through the First Schedule of the Act.
Since the rental of immovable property (excluding residential use) is not included in this exemption list, it is now officially categorized as a taxable service falling under the jurisdiction of the Punjab Revenue Authority (PRA).
Compliance Mandate for Commercial Property Lessors
Consequently, companies and entities that issue Fixed Fee or rental invoices for commercial spaces are now legally obligated to charge and collect Punjab Sales Tax at the rate of 16 percent from July 1, 2025, onwards.
Packages Real Estate (Private) Limited, a prominent entity in the sector, has already formally intimated its clients and partners about this change, emphasizing the necessity of complying with the revised tax structure.
The company’s notice also clarified that its understanding is based on the current legal interpretation and that any future amendments or clarifications issued by the PRA could potentially impact the tax treatment of commercial property rentals. This significant tax imposition is expected to have a notable impact on businesses operating in commercial rented spaces across Punjab.
