In a significant judgment that deviates from earlier precedents, the Appellate Tribunal of the Punjab Revenue Authority (PRA) in Lahore has ruled that the outright sale of developed plots by a real estate developer is not a taxable service subject to the provincial sales tax (PST) of Rs. 100 per square yard of development.
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The Conflict: The PRA Tribunal found an irreconcilable conflict between the entry in the Second Schedule of the Act (which lists services provided by property developers as taxable) and the Act's primary charging sections (Section 3, 6, and 10).
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Charging Provision Prevails: The Tribunal clarified that for a service to be taxable, it must be provided "in the course of an economic activity." As defined in Section 6(1)(b), economic activity for immovable property is limited to "lease, license or such similar arrangements."
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Exclusion of Outright Sale: Applying the 'ejusdem generis' doctrine (meaning "of the same kind"), the Tribunal ruled that "similar arrangements" must be like lease or license, where ownership is retained by the service provider. Since the taxpayer was engaging in an outright sale (transferring ownership), the transaction did not fall under the taxable economic activity.
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Precedent Set Aside: The Tribunal set aside the PRA's show-cause notice and assessment order, ruling that when the charging section conflicts with the Schedule, the operative provision of the Act (the charging section) must prevail. This judgment overturns earlier decisions that had taxed plot sales, relying on the fact that other major housing societies (like DHA and Bahria Town) were already paying the tax.
