ISLAMABAD: Pakistan’s Federal Constitutional Court has upheld the Khyber Pakhtunkhwa government’s authority to impose tax on construction services.
The court dismissed all appeals challenging the Khyber Pakhtunkhwa Sales Tax on Services Act 2022.
Justice Aamer Farooq issued the written judgment. He ruled that following the 27th Constitutional Amendment, the Supreme Court’s jurisdiction in constitutional interpretation stands restricted. He said only the designated Constitutional Court now holds the authority to interpret constitutional matters. The court may also call for records from any court or tribunal.
The ruling declared that Serial No. 14 of Schedule II of the Sales Tax on Services Act 2022, which covers construction services, does not violate the Constitution.
The court recalled that after the 18th Constitutional Amendment, provinces gained the power to levy taxes on services. The federal government may impose taxes only on goods.
The bench directed authorities to ensure that no citizen or company faces double taxation on the same subject. It instructed the revenue authority to frame rules requiring contractors to separate the total project cost into services and goods.
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The judgment clarified that Serial No. 14 applies strictly to construction services and excludes goods. The court ruled that the levy therefore falls within the constitutional domain of the province.
