Sindh Government drives away IT exports by imposing Sales Tax

Sindh Govt becomes a threat to IT

Sindh Government is reportedly exploiting the rights of IT industry as a report by Pakistan Software Houses Association for IT & ITES (P@SHA) reveals that the provincial government has imposed taxes unjust taxes on this sector.

The report depicts a troublesome condition of the IT industry in Sindh where due to unwanted and additional by the provincial government, IT exports and employment are decreasing.

P@SHA explains a that the Sindh Govt. is unique in its ambiguous strategy as no other province in Pakistan imposes sales taxes on IT industry and exploits its rights.

According to the Sindh Budget 2017-18, the respective federal government maintained its stance on the implementation of income taxes on the export of IT related services including call centers and BPO services, for the next three years.

Another hindrance posed by Sindh Government is the exemption of sales tax on the exportation of IT services from Islamabad as well as other similar federal areas. As per the Income Tax Ordinance, the exemption of export income tax will stretch till June 30, 2019 for all exporting Information Technology-Enabled Services companies.

Pakistan Software Houses Association for IT & ITES negotiated with Sindh government and revenue board about the huge responsibility of export sales tax.

It was foreseen that the provincial government would help lessen the tax burden on the IT industry in the budget 2017-18 compared with the last year budget. They decreased the income taxes from 3% to 13% but they did not vanish tax monster entirely, like the other provinces.

Sales tax is imposed on customers rather than providers and in the case of export of IT-enables services and items, how can the service provider pay the tax when the customer is not even present in the country.

State Bank of Pakistan has issued 10 months export data of IT organizations, from July 16 to April 17, that estimates the value provided by call centers to be around $67.9 million.

By imposing taxes, most of this export will move to other tax friendly provinces or other countries, leaving Sindh government in the loss. Recently, the Sindh government has also imposed entertainment tax in the province.

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