The computer industry has proposed to the Federal Board of Revenue (FBR) to abolish 17 percent sales tax on component parts assembled inside the computers 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.
According to the budget proposals of the Pakistan Computer Association (PCA) submitted to the FBR for 2017-18, the FBR has 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 percent 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 percent sales tax on component parts assembled inside the computers in budget 2017-18.
The PCA asked how exemption regime can work when all parts and components remain subject to 17 percent 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. The PCA said that 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 Pakistan Computer Association (PCA) as a nation-wide forum of the IT business community is committed to protecting the interests of its stakeholders and intends to put forward their proposals to the government to review its existing policies and include them in the upcoming Federal Budget 2017-2018 to make it a truly representative one for the smooth running of IT business without impediments in the country.
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 neutralizing 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 enhanced 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 2017-2018 to sustain and strengthen the IT industry and for the promotion of information technology in the country,” it said.
The Pakistan Computer Association greatly values and acknowledges FBR’s contribution towards strengthening its revenue services and extending facilitation to the business community in its endeavour to contribute their share in the national economy. The PCA also assures of its fullest support and co-operation in FBR’s efforts in creating a business-friendly environment in the country.
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 PCA 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 government to document, encouragement of R&D culture, 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 specialized logistics catering to manufacturing companies, wide-spread utilization 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 PCA would like to further present some facts to highlights 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 use of PC and PC penetration is less than 3 percent.