The Finance Supplementary (Amendment) Bill, 2019 requires an amendment to the Sales Tax Act, 1990 to remove an anomaly in IT sector by withdrawing conditional taxes on computer components parts used by the local manufacturer and assemblers.
The computer industry has approached Prime Minister Imran Khan for immediate withdrawal of conditional taxes on computer components parts used by the local manufacturer and assemblers, in the upcoming mini-budget, ie, the Finance Supplementary Amendment Bill 2019.
According to a presentation of Munawar Iqbal, representative of Pakistan Computer Association to the PM, the present government will take into consideration the recommendations and provide its positive support to the computer assembling industry in the country by withdrawing the conditional taxes on computer components parts used by the local manufacturer and assemblers. It would help revival of the IT industry.
The positive and friendly help will not only create a business friendly environment for the computer assembling industry but also usher in large revenue to the government through increased productivity and employment in the country.
The PM should issue directions to the FBR to withdraw the stated notification and provide a zero-rated tax on the computer assembling component parts.
The FBR has granted exemption from sales tax to laptops and personal computers 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.
Munawar Iqbal stated, "While the government is committed to delivering an industrial strategy that contributes to growth and employment, we are focusing on the growth of information technology in the country." The computer assembling industry is at standstill due to conditional withdrawal of GST on computers by the previous government under which manufacturers and assemblers were required to be registered and certified by Engineering Development Board (EDB) in accordance with quota determined by IOCO (Directorate General of Input Output Coefficient Organization) operating under the FBR. The assembled computers (imported) have already been exempted from GST by the government in its Finance Bill 2016-2017.
This FBR notification made the 'ease of doing business' a lot more difficult for the computer assemblers and manufacturers and made their living difficult which rendered large number of workers jobless in this industry. Not only it is massively hitting the computer assembling industry but is also leading to low-level of computer productivity and low generation of revenue to the government, a situation unfavorable to both.
At present, IT sector exports reach around US $2 billion compared to over US $126 billion by India, which requires the immediate attention and sponsorship of the representative government.
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 our economy.
Countries across the globe have seen transformation impact of their economic indicators due to local manufacturing sector. Pakistan has the potential to do the same.
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