Prime Minister Construction Industry Relief Package, Pros & Cons

labour working on construction site

Prime Minister of Pakistan, Imran Khan, launched an economic package for the construction sector at the start of April.  He announced that the construction sector will be now given the status of an industry, revealing multiple incentives, but what does it mean for the construction industry and what are the pros & cons of this package.

He also revealed that a dedicated ‘Construction Industry Development Board’ will be set up which will overview and ensure the growth of the industry.

All this happened at a time when the country was facing the adverse effects of coronavirus, and the lockdown which followed the outbreak of the disease in Pakistan. Many questioned the timing and impact of this package, but everyone is sure that once the country emerges from the lockdown the construction industry, especially the builders and developers will benefit, thanks to the incentives offered through this new package.

In this blog, we will discuss the benefits which are being offered by Prime Minister’s package for the construction industry and then we will go through some of the criticism which are being made against it.

The major incentives of the package include:

  • Investors in the construction industry will not be required to declare the source of income until June 2022.
  • Exemption from withholding tax, except for steel & cement.
  • Fixed Tax will be introduced.
  • Investment in projects of Naya Pakistan Housing Authority will result in 90% exemption of the fixed tax.
  • Rs. 30 million subsidy to Naya Pakistan Housing project.
  • No Capital gain tax for a family that sells their property.
  • Sales Tax reduced to just 2% in Punjab and Khyber-Pakhtunkhwa (KPK)
  • CGT holding period reduced to 3 years.
  • Allowing builders and developers to take credit income up to 10 times of tax paid while declaring their net wealth

These are some of the major incentives which are offered under PM’s package for the construction industry but it is being criticized that many incentives will only benefit few developers and builders while creating problems for common people.

It is being said that removing the requirement of declaring the source of income will result in untaxed and illegal income being invested in property which will make house and property more unaffordable for the majority of the population.

Questions are also being raised on tax exemptions such as capital gain tax which makes it easier to construct and sell property for investment opportunities with speculative practices, allowing them to gain more profit without any tax revenue for the government.

The huge subsidy of Rs. 30 million without any criteria of construction such as occupancy, affordability or maintenance increases the risk that units will be constructed in distant locations with low land cast which will benefit the developer but will not ensure the success of the project by remaining vacant.

Despite all reservations and criticism, all agree that once the lockdown is over, most probably after Eid, the construction industry will see growth due to the relaxation in taxes and other incentives by the government.

By Abdullah Baloch

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