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The Punjab Revenue Authority’s appeal tribunal has delivered a major decision, ruling that the sale of developed plots by real estate developers does not qualify as a taxable service. The judgment blocks the PRA’s attempt to impose a provincial sales tax of Rs100 per square yard on land development, offering significant relief to developers and housing scheme owners.
The case stemmed from two appeals filed against earlier orders by the Commissioner (Appeals-II), PRA, where the authority treated the development of owned land as a taxable service under the Punjab Sales Tax Act. Developers argued that selling plots after adding infrastructure such as roads, utilities and drainage cannot be equated with providing a service. The tribunal examined the issue in light of constitutional powers after the 18th Amendment, noting that taxation on immovable property falls under federal jurisdiction, while provinces may only tax services.
In its decision, the tribunal stated that
“the core of the transaction is the transfer of immovable property, and it cannot be artificially classified as a service simply due to value addition.”
It also observed that Section 3 of the Punjab Sales Tax Act only permits taxation of genuine services and that no delegated legislation or schedule entry can override this fundamental rule.
Sources familiar with the case said the ruling reinforces the constitutional boundary between federal and provincial taxation. They noted that landowners who develop their own property and sell it through registered sale deeds are engaged in a sale of assets, not a service delivery activity. Developers described the decision as a corrective measure that eliminates a long standing ambiguity in the real estate sector.
The tribunal annulled all tax demands, penalties and default surcharges raised by the PRA, ordering their complete deletion from official records. Legal experts say the verdict may influence future provincial tax interpretations involving real estate development and capital assets, especially as provincial authorities continue to explore new revenue avenues.
