Sales tax exemption on import of computers, networking devices flayed

The local computer industry has rejected SRO 483(I)/2008 of the Federal Board of Revenue (FBR), which has exempted sales tax on the import and local supply of computers and networking equipment.
On May 28, the board issued a notification to give sales tax exemption on the import and supply of machinery and equipment by financial services providers authorised by the State Bank of Pakistan (SBP) under the Improving Access to Financial Services Programme (IAFSP).
Under the SRO.483(I)/2008, financial services provider covers entities, including commercial banks, microfinance banks, Islamic banks, non-government organisations, rural support programmes and leasing companies. The sales tax exemption would be applicable on the import and supply of networking equipment, including ISDN equipment, DSL equipment, data switches - ATM frame relay and VOIP switches - network switches and modules and other items.
Sales tax exemption would also be applicable on equipment for the third party content provisioning across, multiplexers, statistical multiplexers, personal computers (PCs) and laptops, printers, ATMs and other specific items.
Strongly reacting to the relief, President of Pakistan Computer Association (PCA) Munawar Iqbal told Business Recorder on Thursday that the notification seemed to protect the vested interests of some financial institutions at the cost of local industry and consumers.
The sales tax relief solely for banks and other financial institutions would have serious implications on the computer industry, which was already struggling for survival after the imposition of 15 percent general sales tax (GST) on the industry, he added.
He said that the SRO clearly reflected the double standards of the FBR, and pointed out that the tax authorities had rejected the demand of PCA for the withdrawal of sales tax on computers. The recent action of the FBR was self-contradictory for few sectors, but the levy would continue to remain applicable for others, he said.
The SRO was sector specifically aimed at benefiting only a few, he said, adding it seemed that the FBR was not interested in providing relief to the general masses. He said majority of beneficiaries of this SRO were foreign-owned/controlled financial sector's entities, who had already been extended a lot of concessions. The SRO had encouraged imports of equipment from multinational manufacturers, hurting local manufacturers/assemblers, he said, and added that it would lead to further un-employment and severe hardships to the already depressed sector.
He said that all those entities, falling under the financial sector providers, could not import on their own and imports purported for these FSPs would be misutilised. He said the SRO would cause loss of business to local vendors and small industries SMEs. The representatives of the computer industry from all over the country also condemned the FBR's decision, and demanded of the new government to immediately intervene to revert the decision.