The Pakistan IT industry has played a major role in placing Pakistan on the international map and has 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 smooth running of IT business without hindrance 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.
A break up of the IT products used in assembling computers with HS Codes being charged under sales tax regime is attached as IT Product Sheet herewith under Annexure-A.
The Datasheet 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.
IMPROVEMENT OF TAX POLICY
IT PRODUCT DATA SHEET
|Existing Law||Proposed Amendment|
|S #||PRODUCT||H.S. CODE||CD||ACD||S.T||A.D.
|1||USB Flash RAM||8523.519||3%||1%||17%||3%||6%||5%||1%||–||–||6%|
|4||SSD Hard Drive||8471.703||3%||1%||17%||3%||6%||5%||1%||–||–||6%|
|5||Hard Drive / Portable Hard Drive||8471.702||3%||1%||17%||3%||6%||5%||1%||–||–||6%|
|14||Motherboard / Printed Circuit Board||8473.309||3%||1%||17%||3%||6%||5%||1%||–||–||6%|
RATIONALE: 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 about the following benefits to the local manufacturing industry: –
1) Creation of jobs, development of higher level of skills.
2) Development of new technologies, innovation in industry, transfer of knowledge.
3) Economic development, opportunity for government to document.
4) Encouragement of R&D culture.
5) Ripple effect benefits in greater broadband adoption.
6) Saving of foreign exchange, lesser reliance on foreign countries to fulfill local needs.
7) Potential emergence of viable specialized logistics catering to manufacturing companies.
8) Wide-spread utilization of IT due to affordability of locally assembled products.
9) Respectability of products “Made in Pakistan” due to government support, revival of
industry & association of quality with local products.
10) Increase in Foreign Direct Investment.
The IT industry is the 4th pillar of our 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 households across the country. The PCA would like to further present some facts to highlights its recommendations:-
- In Pakistan, there are 200,000 schools without PCs
- 2.5M 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 United
Nation’s ITU ICT index
- Pakistan lowest in South Asia in terms use of PC.
- PC penetration is less than 3%.
|Segment||Segment Share||Number of Institutions using IT|
(Sources: IDC, ITU, Industry estimates)
The promotion of the information technology in countries like, China, Vietnam, Portugal, 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 our economy.
The PCA anticipates that its Budget Proposals will be given due consideration by stakeholders in the GOP for inclusion in the coming national budget for 2017-2018 for the growth of IT industry and for the promotion of information technology in the country.