General Clarification: Applicable Tax Rates on Government-Funded Projects including ADP/PSDP Funded Projects
For the information and guidance of all government departments, withholding agents and other stakeholders it is clarified that, as per entry at S.No 11 of Part-II of Second Schedule to the Khyber Pakhtunkhwa Sales Tax on Services Act, 2022, government-funded construction projects, including those financed under ADP/PSDP as well as hydropower projects, are subject to sales tax at the rate of four percent (4%) without input tax adjustment. However, in case of ADP-funded ongoing projects which were initiated or approved during period starting 01st July 2021 till 30th June 2025 shall continue to be taxed at the rate of two percent (2%) without input tax adjustment.
It is further advised that all concerned authorities may carefully ascertain the approval or initiation date of projects while applying the relevant tax rate. This clarification is issued to ensure uniform application of the applicable rates and to address concerns raised by various service providers. All stakeholders are requested to take note of the above and ensure correct application of tax rates.
This clarification is issued with the approval of the competent authority for general guidance only and shall not be construed as a substitute for the provisions of KP STS Act, 2022.
In case of any further clarification, service providers are advised to contact the Facilitation Officers at KPRA Headquarters, Peshawar or contact us through official WhatsApp number 0333-1421423 (operated by Deputy Director Communication)
