KARACHI: Sindh government has imposed sales tax on income earned from properties rented for commercial activities, but not below Rs400,000 annually.
According to a Sindh Revenue Board (SRB) official, services sales tax has only been imposed on income from renting shops, banks or other commercial operation.
“There are misconceptions after the provincial parliament approved a bill, which brought rent of immovable property under the ambit of economic activity,” Mushtaq Kazimi, adviser Tax Policy of SRB said.
“If an immovable property has been rented for residence then it is exempted under the law. Even if it is rented for a commercial purpose but the (rental) income is below threshold under Income Tax Ordinance 2001 there is tax exemption too.”
Kazimi said the bill approved by the Sindh Assembly stated that a renting property is subject to sales tax on services. Though the provision was already available under the Sindh Sales Tax on Services Act 2011 the new legislation removed the ambiguity as taxpayers and tax officials were contesting on the definition of property.
The tax on renting of property was initially brought through Sindh Finance Act 2015. The law was further amended over the period.
Initially, the sales tax rate was six percent with no input tax admissibility, but the tax was later increased to eight percent in 2016.
