PESHAWAR: The Khyber-Pakhtunkhwa government has presented the Finance Bill alongside the budget for the next financial year, offering a mix of tax relief for small businesses and low-income groups while introducing fixed taxes on various professions and commercial activities to broaden the revenue base.
Tax Relief Measures
In a significant relief measure, the provincial government has decided not to impose any new taxes. The Infrastructure Development Cess has been reduced from two per cent to 0.75 per cent. Residential and commercial properties up to five marlas have been fully exempted from property tax, while the hotel bed tax has been lowered from seven per cent to five percent. Professional tax has been abolished for individuals with low monthly incomes, and government employees from Grade 1 to Grade 6 have been exempted from it. A 30 per cent relief has also been granted on tax arrears for industrial buildings. The government has maintained the existing tax relief policy for the former FATA and PATA regions, ensuring no new taxes are levied there.
Fixed Annual Taxes
According to the Finance Bill, fixed annual taxes will be collected from various businesses and service providers. Video shops, property dealers, car dealers, and net cafes will pay Rs10,000 each, while vehicle service stations will also contribute Rs10,000. Chartered accountants will pay Rs25,000, transport companies Rs10,000 to Rs15,000, and stock exchange members Rs60,000. General grocery stores will be taxed Rs5,000, electronics shops Rs25,000, cable operators and printing presses Rs10,000, and tobacco dealers and exporters Rs25,000. Wholesalers will pay Rs35,000, chemists and medical stores Rs20,000, and tailors Rs5,000 for shalwar kameez stitching or Rs15,000 for other work. Flour mills will contribute Rs40,000, brick kilns, rate depots, and construction material suppliers Rs20,000, and furniture showrooms between Rs5,000 and Rs30,000. Honey shops and wholesalers, beauty parlours, sweet shops and bakers will pay Rs10,000 to Rs15,000, while marble factories will be taxed Rs20,000.
Motor Vehicle Taxes
Amendments to the Motor Vehicles Act 1958 have introduced new annual taxes on commercially operated vehicles. Rickshaws will pay Rs1,000, four-seater vehicles Rs1,500, and six-seater vehicles Rs2,000 per year. Vehicles with 15 seats will be charged Rs400 per seat, while those with more seats will pay Rs500 per seat. Hotels will face a five per cent tax based on the number of rooms and actual occupancy. Establishments without a Point of Sale system will be taxed on 50 per cent of residential units plus 10 per cent of actual room rent.
Penalties and Compliance
The Finance Bill also proposes strict penalties to ensure compliance. Failure to file tax returns by the deadline will attract daily fines and surcharges. A minimum penalty of Rs400,000 will be imposed on those who fail to apply for registration before providing taxable services, while failure to register within 90 days could result in up to one year imprisonment or a fine equal to the tax amount, or both. Changes in registration details will invite a Rs25,000 fine, and late filing of returns will carry a daily penalty of Rs300. Failure to install the Restaurant Invoice Management System may result in a Rs500,000 fine or five per cent of the relevant tax. Tampering with tax records could lead to a Rs500,000 fine or five per cent of concealed sales value. Non-payment of tax within 60 days of a notice from a lower-ranking officer may attract up to three years imprisonment or a fine equal to the unpaid tax, or both. Submitting false documents could result in a Rs500,000 fine, one year imprisonment, or both, with repeat offenders facing double the punishment. Government officers whose actions cause loss to taxpayers may face up to three years imprisonment and a Rs50,000 fine. Bank officers failing to recover directed taxes could face one year imprisonment or a five per cent penalty on the tax amount.
Other Taxes
A four per cent tax will apply to ADP projects approved after July 1, 2025, though schemes related to poverty alleviation, women, disabled persons, and children will be exempt. Services provided through digital or online platforms will attract a five per cent tax. Self-occupied properties up to five marlas will face no tax, but non-self-occupied ones will be charged on a slab basis ranging from Rs1,200–2,000 for up to five marlas to Rs15,000–40,000 for properties above 40 marlas. Rented properties will attract double the tax, with government, semi-government, NGOs, banks, and other institutions facing rates between five per cent and 15 per cent depending on the category. Professional tax slabs have also been defined, with individuals earning Rs65,000 monthly paying Rs1,400. Government employees in higher grades will pay between Rs1,200 and Rs4,000. Limited companies, clinics, hospitals, medical colleges, clearing agents, tour operators, restaurants, wedding halls, advertising agencies, and private practitioners will pay fixed taxes ranging from Rs10,000 to Rs100,000 based on their scale and category. Educational institutions will be taxed only on under-construction areas with a 30 percent special concession, while certain industrial and utility properties will face specific per-marla or fixed charges.
