The Punjab government has officially imposed a 16 percent sales tax on the rental of commercial properties, effective July 1, 2025, under the provisions of the newly enacted Punjab Finance Act, 2025.

The tax will apply to all Fixed Fee Invoices associated with the rental of immovable property, except for residential dwellings rented for personal use. This change marks a significant shift in the province’s taxation approach, as Punjab moves from a “positive list” model—where only listed services were taxable—to a “negative list” system. Under the new framework, all services are now taxable by default, unless specifically exempted under the First Schedule of the Act.

Because commercial property rentals are not listed as exempt, they are now treated as taxable services under the jurisdiction of the Punjab Revenue Authority (PRA). As a result, landlords and real estate companies issuing rental invoices for commercial spaces are now required by law to charge and collect 16% Punjab Sales Tax from tenants.

Real estate firms have begun notifying clients of the change. Packages Real Estate (Private) Limited issued an official letter to its partners and clients, outlining the new tax requirement and urging strict compliance with the revised structure. The company emphasized that its interpretation is based on the current wording of the law and cautioned that any future clarifications or amendments issued by the PRA could impact how the tax is ultimately applied.

This move is expected to generate significant revenue for the provincial government, though it may also increase rental costs for businesses operating in Punjab’s commercial hubs. Analysts believe it could influence leasing decisions across sectors, especially for small and medium-sized enterprises already facing tight margins amid rising operating costs.

The Punjab Revenue Authority is expected to issue further guidance in the coming weeks to clarify compliance procedures and address stakeholder concerns.