Construction has emerged as a growth-oriented industry in Pakistan with its impact extending beyond providing framework for infrastructure, house demand and job creation. Even as we face 2025, it is key for stakeholders to have insights into the tax regime and, more specifically, with respect to GST rates applicable on property developers. Pakistan’s General Sales Tax (GST) or commonly known as sales tax on services, is the major guiding factor to control transactions in this domain. This blog discusses the complexities of GST on real estate in 2025, GST rates on construction services and other charges such as income tax on construction services in Pakistan and the service tax rate in Pakistan. Whether you’re a developer, investor or homeowner, these insights will enable you to plan constructively around changing fiscal policy.
Overview of GST in Pakistan’s Construction Sector
Pakistan’s Goods and Services Tax (GST) regime, administered by Federal Board of Revenue (FBR) and provincial authorities, covers supply of goods and services including in construction and real estate sector. The Pakistani system is a federal goods sales tax at 18% percent and provincial goods sales tax (GST) on services that has varied rates from 15-16%. For the construction industry, the GST focuses more on services such as land development, building construction, and property promotion.
In 2025, most provinces (Islamabad, Sindh, Balochistan, Khyber Pakhtunkhwa) have a services tax rate of 15%, but Punjab will have a services tax rate of 16%. This rate is for construction services, and reduced rates or exemptions are applicable in case of essential activity or export purposes. The federal 2025-26 budget has incentivized the industry by providing certain incentives, such as lower withholding tax on property transactions, to spur the real estate sector and at the same time expand the tax net.”
GST on Real Estate in 2025
Real estate GST in 2025 is still focusing on transparency and affordability with no significant changes reported recently in the budgeting. Real Estate deals including plot sales, construction buildings and transfers of developed properties are liable to service tax on the service component. Imported construction materials are taxed under the federal sales tax system at an 18% rate, while local services are charged by the provincial GST.
For real estate developers, the GST is imposed on development and marketing services that are typically subject to lower rates for housing promotion. In Islamabad Capital Territory, property developers are taxed on ‘services’ according to their land area and type of construction, with differing rates for affordable projects. The 2025 budget eliminated the Federal Excise Duty (FED) on real estate activities, which is likely to have a positive impact on developers’ costs and ultimately end-user pricing.
Here’s a brief lowdown on whether the new system applies to real estate.
| Transaction Type | GST Rate (2025) | Notes |
| Land development services (plots) | 15% (provincial) | Based on sq. yards; reduced for affordable housing |
| Building construction services | 15-16% | Excludes land value; 18% on imported materials |
| Property promotion/sale services | Specific rates (e.g., Rs. 10-35 per sq. ft. for builders) | Varies by province and project size |
| Real estate transfers (resale) | 0% (if completed) | No GST on ready-to-move properties |
GST Rates on Construction Services
GST on construction services is a provincial subject matter. Construction activities including civil work, subcontract and finish also come under the purview of provincial GST at the standard services tax rate of 15-16 percent in Pakistan.
By 2025, The FBR has made compliance easier for contractors by making digital invoicing compulsory for all registered concerns. In the case of work-like contracts, he covers both labor and materials supplied through the contractor. There are discounted rates (e.g., 5% on health-related construction), but regular projects receive the full rate.
| Service Type | GST Rate (2025) | Province Variation |
| General construction (civil works) | 15% | 16% in Punjab |
| Sub-contracting (e.g., earthwork) | 15% | Exemptions for govt. projects |
| Finishing services (painting, etc.) | 15-16% | 18% if materials imported |
| Affordable housing construction | Reduced (5-10%) | Incentives in budget 2025-26 |
Income Tax on Construction Services
As GST applies to indirect taxes, in Pakistan income tax on construction services focuses on direct incomes, resulting in double compliance. For 2025-26, builders and developers have gone for a presumptive tax regime under Section 100D of the Income Tax Ordinance wherein gross receipts are taxed and not net income to keep it simple.
Under this regime:
- Construction and building sales: 10% of gross receipts
- Development and sale of plots: 15% of developed plots sold.
- Aggregate activities: 12% of gross receipts
This subsequent final tax discharge is a project-by-project measure where advance payments are necessary at plan approval (5% of estimated liability). For non-opted entities, there are progressive slabs up to 35% and a minimum tax of 1% on turnover.
There’s another layer of withholding taxes: 6% on contracts (12% for non-filers) and up to 4% in property sales. These rates were lowered in the 2025 budget (from, for example, 3% to 1.5% on mid-value properties), providing developers with needed cash flow relief.
Construction Sector Guidance by CBM Consultants
CBM Consultants supports developers and builders with GST by advising on appropriate tax classification, calculating the tax for construction work, preparing compliant invoices, and handling provincial sales tax registration. We also deal with GST return filing that means to maintain accurate project costing and documentation, for not paying penalties on time compliance. Guided by our professionals, developers can maximize tax planning, ensure they’re not unwittingly breaking any laws and keep cash flow problems to a minimum, all across different types of projects.
Challenges and Opportunities
Challenges fronting constructions, inflation and cost of materials, competition aggravated with 18% GST on imports. However, there are opportunities in 2025 with lower stamp duties for Islamabad (from 3% to 1%) and CGT simplifications (15% for filers on post-July 2024 acquisitions). Digital offerings from FBR such as the builder tax calculator help with compliance.
On inputs, property developers can go as high as getting 15% back if they plan their GST early through registered suppliers and correct invoicing. Affordable segments have fewer effective prices for the homebuyer, resulting in increased market size.
Conclusion
Pakistan’s construction sector aims to contribute 7-8% to the GDP by 2025, learning GST rates on property developers and related taxes is a must. With 15–16% GST on Real Estate (services component) by the year 2025 and presumptive relief in income tax on construction services in Pakistan, it balances revenue considerations with incentives. Developers ought to take advantage of provincial differences in the service tax rate in Pakistan and check FBR’s websites for latest info.