Chairman CBR should look into the matter of unannounced imposition of 25% customs duty on software products by customs authorities. Earlier, the software products were imported under HS Code 9934:0000 and were exempted from customs duty and sales tax.
This HS Code was omitted and replaced in the budget announced on June 12, 2004 and since then the situation of software import became highly ambiguous.
The customs officials at the Airport (AFU) are not sure which HS Code is applicable on software products.
They have now started working with the idea that 25% customs duty should be levied. Customs officials derive their opinion, considering software as a re-playable recording and for establishing their own point of view; the appraisers go into the intricacies of how the software is read by the playing devices.
Such inferences are wrong and show either their inadequate knowledge about software or malicious intentions of grabbing illegal gratification from importers, who are caught unaware. A customs officer deputed at Karachi Airport is obstructing with the consignments of software that are imported in the country.
It is also interesting to note that CBR officials in Islamabad are unaware of the present situation that is going on at Karachi Airport.
The government should educate the CBR and customs officials so that they should understand the application of the software, its significance in the national economy and the difference between major categories of software, such as, operating system, application software, educational software and software used in microprocessor based industrial machines for automatic operation.
Since the Ministry of Science and Technology has always remained considerate about the information technology affairs in the country, therefore, recommended exemption from customs duty and sales tax on IT/computer related products should also include software.
At present there is no customs duty on the import of computer hardware/parts and if the "software" is subject to customs duty/sales tax, the real essence of promoting IT in Pakistan will simply fade away.
Imposition of customs duty will result in stoppage of software import from abroad. In the absence of business software, use of PCs will be substantially reduced resulting in complications in the long run and it will have negative cascading effect on the national economy.
The domestic software industry is still in its infancy and it is very unlikely that there will be any production of patented world-class software for general business and educational use in the near future.
The CBR is aware of the fact that documentation is the only way of controlling unorganised Pakistani economy.
Most businesses have realised this requirement and are inclined towards using application software for accounting, enterprise resource planning, material requirements planning, purchase/sales ordering and sales tax/commercial invoicing etc.
The imposition of customs duty on "software" will make the software expensive, and consequently, many businesses and industries will postpone computerisation for years.
Chairman CBR should look into the matter personally and exempt customs duty on the software products in general. A new PCT should be devised so that ambiguities do not arise. If at all there is a need for the government to generate revenue from software imports, a nominal customs duty of 5% may be levied specifically on software for machinery operation under HS Code 8524:3100.
The operating system, application software and educational software should be totally exempted from customs duty, as 6% advance income tax is sufficient enough for generating revenue at software import stage.
Chairman CBR should consider exempting software products from customs duty, as it is a requirement of national importance.
The government, without further delay, should announce exemption of customs duty on import of software in Pakistan, so that customs officials deputed at Karachi Airport should not play any more with the importers of software in the country.
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