Lahore: The Appellate Tribunal of the Punjab Revenue Authority (PRA), Lahore, has ruled that the sale of developed plots by a real estate developer does not constitute a taxable service under provincial sales tax, and no levy at the rate of Rs100 per square yard is applicable.
The tribunal issued a consolidated judgment in two appeals against the orders of the Commissioner (Appeals-II) PRA, Lahore. It examined whether a landowner who develops land into a housing scheme—providing infrastructure like roads, parks, and utilities—and then sells plots for lump-sum consideration, is supplying “services provided by property developers, builders, and promoters” under Serial No. 15 of the Second Schedule.
The tribunal emphasized that Section 3 of the Act imposes tax only on “taxable services,” and the term “provided” implies rendering a service to another person. Since the developer bears all costs, risks, and owns the land, the sale merely transfers ownership of immovable property. The added infrastructure becomes part of the property itself, not an independent service.
Relying solely on Serial No. 15 of the Second Schedule cannot override the charging provision or constitutional limits. The tribunal noted that taxation of immovable property falls under federal jurisdiction, while provinces can only tax services. Imposing sales tax on the transfer of developed plots would amount to double taxation.
Consequently, the tribunal set aside the original orders of the Commissioner (Appeals) and deleted the tax demands. No tax, default surcharge, or penalty is payable on these transactions.
