The Value Added Tax (VAT) reduction on small-size flats is unlikely to help mid-income people, who prefer to buy small- and medium-size flats, particularly the small ones, industry insiders said.
They said the government has halved the VAT rate by 50% for flats below 1,100 square feet, but most realtors do not construct such small flats, and so these will not help the buyers, nor the people in the sector.
With the budget for fiscal year 2015-16, the government has introduced three slabs of VAT on apartment purchase instead of previous flat rate of 3% irrespective of sizes. The National Board of Revenue (NBR) on Monday published an official order to effect the new rates as finalised in the budget for the current fiscal.
According to the new order, people willing to buy flats up to 1,100 square feet will have to pay 1.5% VAT on the purchased value while the rate will be 2.5% for flats sized between 1101-1600 square feet and 4.5% above 1600 square feet.
The NBR charges the VAT at source on the total amount of purchase value or the transfer value from sales of any apartment.
The building construction firm collects the VAT and deposits it to the national exchequer.
Although many buyers willing to buy small flats earlier consider it a good news, but the scenario is unlikely to match their assumptions.
The sector people said the budgetary measures will only help the buyers of mid-size apartment, not others.