GST likely to be imposed on IT industry
KARACHI – Pakistan’s IT industry – still allauded to be in its infancy stage – is liable to face an imposition of 15 per cent General Sales Tax (GST) in the impending budget, after enjoying a tax holiday for over a decade.
Sources at the IT industry and those abutting to the finance ministry say that the proposal to impose 15 per cent GST on the industry has almost been finalized.
“Actually, the IMF (International Monetary Fund) has asked the government for such action as it thinks Pakistan’s IT industry has grown enough to pay government’s share,” said a source close to the finance ministry.
“It would be too early to exactly inform about the areas that lie under the tax regime. But I can say it would cover the overall trade in the industry,” he added.
Just over a decade old, the IT industry continues to enjoy a tax holiday. The stakeholders of the IT sector are even free to import computer related equipment without prior permission from the Pakistan Telecommunications Authority (PTA) or any other government organization as the authority withdrew the pre-condition last year.
“Currently, we are enjoying tax holiday. We don’t have any taxes on software trade or any other support services,” said Jehan Ara, President Software Houses Association.
“All credit goes to the government which realized the importance of the industry,” she added.
According to sources, the GST would be imposed on computer and its accessories imports, software trade and development business.
Similarly, the 15 per cent GST would be charged from the country’s Internet Service Providers, serving millions of subscribers without any government tax.
“According to the proposal under consideration, the ISPs would be bound to pay 15 per cent GST. At present, not a single tax is imposed on over 50 ISPs,” said the source.
However, as the budget is approaching, the stakeholders of the IT industry have accelerated their efforts to prevent the authorities from executing the proposed action.
“As we have learnt about the GST, I think it would reverse the industry’s growth that it has registered in the last couple of years,” said Jehan Ara.
“We had several meetings within the association and also with the apex trade bodies like the FPCCI (Federation of Pakistan Chambers of Commerce and Industry) on the issue,” she added.
She said that all the affected parties have agreed to move the power corridors for thwarting the implementation of the proposed GST.
The software sector shares around $50 million in the country’s total export.
Currently, only 323 out of the total 664 registered software houses are operating, while 211 are closed.
According to ‘census of the software industry and the related services of Pakistan’, conducted by the Federal Bureau of Statistics as many as 86 firms are not traceable due to wrong addresses’ or shifting to other places, whereas 34 have changed their business or have closed their software development business.
The ISPs have also come up with a strong reaction against the finance ministry’s proposal.
“The PTA has issued nearly 140 licenses of ISPs and DNOP in total and only about 50 companies are operating in Pakistan. How can you say that the IT sector has reached a matured level?” said V. A. Abidi, Secretary General ISPs Association of Pakistan.
“We don’t agree with the IMF idea. Most closures were experienced during 2003 due to the high charges of the state owned monopoly of the PTCL,” he concluded.
Source: The News
Date:5/11/2004
” 
” 
” 
” 
