IT Industry to meet PM -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

IT Industry to meet PM

ISLAMABAD: The Pakistan Software Export Board (PSEB) and the leading vendors of computer hardware are taking their dis­agreement with the finance ministry over imposition of 15 per cent General Sales Tax (GST) to the Prime Minister of Pakistan.

Representatives of IT enabled industry along with top IT ministry’s PSEB officials may soon get a hearing by Prime Minister Shaukat Aziz in response to their SOS call.

A PSEB spokesman confirmed seeking an urgent hearing with the prime minister.

In the 2006-2007 federal budget, 15 percent GST has been imposed on computers and components while customs duty of 5 per cent on the import of computers only was removed and withholding tax of 6 per cent was reduced to 1 per cent.’ No duties existed in any case on the import of components prior to 2006-07.

The government had based GST imposition on the premise that over the years, sales tax exemption on computer hardware was provided to encourage the spread of information technology and use of computers and now that the IT industry has taken roots and attracting huge investments, the trend for buying branded computers has increased substantially.

Ever since the finance ministry’s controversial decision to adopt short-cut measures to maximise its revenue collection, the IT industry has been complaining of being pushed to the wall and eventually impeding the catalytic growth of IT-enabled industry. The IT&T ministry fully agrees to the computer vendors’ point of view.

Official data points out that the demand for computers in segment the government, education, SME sector and domestic use is, fairly elastic, implying that a 1 7 par cent increase in price of new locally assembled PC’s will lead them towards purchasing used PC’s.

“This signifies that a very large segment of our population, which cannot afford new computers and was buying used and obsolete technology, will increase,’ said a senior IT official in the government.

He quoted the figures of 2005 when nearly 50 per cent of the computers sold in Pakistan were used computers. In three years time, he said, the figure will in­crease to 70 per cent of the total computers sold.

“The growth rate of PC’s will also decrease as the prices have increased hence the PC growth rate will fall from 20 per cent annually to 10 per cent every year,” forecasted the top official, requesting anonymity.

The Pakistan Software Houses Association, Call Centers Association of Pakistan, Computer Society of Pakistan, Pakistan Computer’ Association and All Pakistan Computers Assemblers/Importers, have gathered under the umbrella of PSEB to take the issue to the highest level.

A careful market analysis with the GST imposition in the new fiscal budget, computer prices have shot up at least 15-20 per cent and make them unaffordable for some home users, educational institutions, and other price sensitive users.
The CBR’s move has clearly impeded the computer penetration growth curve since July till mid­February.

Sources in the finance ministry agree with the decline in the import of PC compared to the percentage share witness last year in the same span and bracket of time.

According to State Bank of IT related export growth last year reached 56 per cent. Even a Singapore-based leading innovator in the IT market research industry notes that the Pakistan’s personal computer and server market is one of the fastest emerging sectors in South Asia and in the past few years. The firm announced that Pakistan PC shipment grew 20.9 per cent in second quarter of 2006 (April-June) to 173,834 units as compared to the same quarter of preceding year.

Interestingly, the GST imposition is costing the government institutions dearly as they are one fast attempting to catch up with the digital divide. The News learnt through official documents that the government has greatest PC purchase share, for example 23.7 per cent of total shipment in second quarter of 2006, followed by large enterprises (500+ employees) and the home segment.

After a series of fruitless meetings between Ministry of Information Technology, CBR authorities and the representatives of various segments of IT industry of Pakistan, the matter has reached Prime Minister’s Secretariat ahead of budget planning for 2007-2008.
Source: The News
Date:2/21/2007