The computer industry had proposed to the FBR to abolish 17 percent sales tax on such parts in the budget 2017-18 to practically benefit from last year's concessions of zero-sale tax regime on imports and supply of computer/laptops. The anomaly has not been removed and Finance Minister Ishaq Dar should immediately ask the FBR to review the status of sales tax on computer industry to ensure uniform treatment of sales tax exemption on raw materials as well as finished products, sources said.
According to the budget proposals of the industry submitted to the FBR for 2017-18, the FBR had granted exemption from sales tax to laptops and personal computers in last budget to promote genuine imports and render informal and illegal imports as uncompetitive. However, the parts/component assembled inside the computers remained subject to 17 per cent sales tax. This has created a serious distortion in the system and actual benefit of the concession has not been available to the computer vendors. In order to remove the distortion, the FBR must abolish 17 per cent sales tax on component parts assembled inside the computers in budget 2017-18.
Industry sources said that the proposal has not been incorporated in the Finance Bill 2017. The industry has asked how exemption regime can work when all parts and components remain subject to 17 per cent sales tax, but only finished item ie computers is exempted from sales tax. They said that due to this sales tax, the sector could not achieve the heights that were expected and a boom in this area is still awaited.
Pakistan IT industry has played a major role in placing Pakistan on the international map and successfully built very valuable brand equity for itself in the global markets.
The IT industry is at present faced with the imposition of 17% sales tax being charged on the component parts assembled inside the computers, thereby neutralising the government's budgetary announcement under which the computer/laptop bearing the same component parts were placed under the zero-sale tax regime, the PCA maintained. The industry data proposes improvement through amendment in the existing tax policy with a view to help the IT industry in smooth and unhindered running of its business as well as to help the government in enhancing revenue generation.
The promotion of the information technology in countries like China, Vietnam, Portugal and Argentina is linked to the growth of their local IT assembling industries. Pakistan has the potential to do the same and the aforesaid recommendations will serve as guidelines to accelerate the prospects and improvements of the IT industry in the country with greater impact on national economy.
"We earnestly hope that under your vibrant and dynamic chairmanship, the FBR would consider our above proposals and include them in the upcoming budget for 2017-18 to sustain and strengthen the IT industry and for the promotion of information technology in the country," it said.
The products are mainly sold at the retail shops and there is no trend of sales tax so revenue can be compensated by increasing the duty. The industry believes that its proposals/recommendations, if accepted and included in the upcoming budget, will bring benefits to the local manufacturing industry. The benefits included creation of jobs, development of higher level of skills, development of new technologies, innovation in industry, transfer of knowledge, economic development, opportunity for the government to document industry, encouragement of R&D culture, and ripple effect benefits in greater broadband adoption. The benefits also included saving of foreign exchange, lesser reliance on foreign countries to fulfill local needs, potential emergence of viable specialised logistics catering to manufacturing companies, wide-spread utilisation of IT due to affordability of locally assembled products and respectability of products "Made in Pakistan" due to government support, revival of industry & association of quality with local products.
The IT industry is the 4th pillar of national economy and the government must set its milestones and announce the Vision 2020 for economic growth led by automation in IT industry and increase PC accessible to every household across the country. The industry would like to further present some facts to highlight its recommendations that in Pakistan, there are 200,000 schools without PCs; 2.5 million small businesses yet to own a PC; dismally low technology usage by the governments; Pakistan stands at 143rd position out of the 157, downward slide in the United Nation's ITU ICT index; Pakistan lowest in South Asia in terms of use of PC and PC penetration is less than 3 per cent.
Copyright Business Recorder, 2017