ISLAMABAD: In a major policy reversal, the federal government has announced the immediate abolition of the 3% Federal Excise Duty (FED) imposed on the first sale of all properties, a move aimed at reviving Pakistan's struggling real estate sector. This controversial tax had been in effect since July 2024 and had faced widespread criticism for stifling growth in the housing and property market.
The decision comes after nearly 10 months of industry backlash and was made in consultation with the International Monetary Fund (IMF), according to a senior Federal Board of Revenue (FBR) official. The IMF is also scheduled to send a budget review mission to Pakistan on May 14 to assess the fiscal plan for the 2025–26 financial year.
As per FBR sources, the FED rates of 3% for tax filers and 5% for non-filers on the first sale, transfer, or allotment of properties will now be abolished. A formal summary to initiate the legal process has been submitted, with the government aiming to complete the repeal within this month, pending cabinet and legislative approval.
Dr. Najeeb Memon, spokesperson for the FBR, confirmed that the prime minister’s task force on housing had recommended scrapping the FED and legislation to that effect is expected soon. He emphasized that the tax had not only hampered the sector but also created friction due to its legal ambiguity, as immovable property falls under provincial jurisdiction per the Constitution. Many real estate authorities resisted implementing the FED, and several taxpayers challenged it in court.
During the current fiscal year’s first nine months (July–March), revenue collection from this tax was negligible. Industry insiders argue that the levy discouraged investment and increased the cost of doing business, particularly in housing development.
Finance Minister Muhammad Aurangzeb has already approved the summary to repeal the FED, and it will now be presented to the federal cabinet to amend the Federal Excise Duty Act. The government is keen to finalize the process promptly to provide relief to the property market ahead of the upcoming budget.
The FED, introduced in last year’s budget, applied to all new sales of residential and commercial properties—houses, apartments, and plots—after June 30, 2024. The rates were 3% for active tax filers, 5% for late filers, and 7% for non-filers, and the tax was collected at the time of booking, allotment, or transfer.
Despite repeated attempts, IMF Resident Representative Mahir Binici did not comment on whether the IMF officially endorsed this policy shift.
