Tax exemption helps grow IT industry

ISLAMABAD: Tax exemption on Information Technology exports, IT services and products until June 2019 is an incentive of the incumbent government to promote IT industry, which will ensure a new era of evolution in the country.

IT is an emerging sector and it requires support to flourish. The current situation is the main reason for tax exemption on IT sector till June 2019.

The federal government has extended the exemption on exports of IT products and services in the federal budget for 2016-17.

Over the last few years, the Ministry of IT and Telecom (MOIT) has taken a number of initiatives for the development of ICTs especially in the arena of access, skills, markets, and governance to attain vision of a Digital Pakistan, an official of the ministry said.

Led by IT Minister Anusha Rehman, the MOIT has successfully created an enabling environment where citizens, companies and the government become technology enabled to avail opportunities being offered to them by what is called the 4th Industrial Revolution.

Every year, MOIT works with the Ministry of Finance, Federal Board of Revenue, and other agencies to introduce new incentives and initiatives that can fast track the trajectory towards a Knowledge Economy and Society.

After coordinated efforts of PTA and telecom industry, Withholding Tax has been brought down to 12.5% from 14% in the Federal budget for FY 2017-18. However, the Withholding Tax @12.5% on every mobile recharge is still high because majority of the subscribers fall below the threshold of being a tax payer and hence, cannot get the paid amount adjusted in their annual tax returns.

Similarly, Federal Excise Duty (FED) has also been decreased to 17% from 18.5% in the same budget.

After the continuous and strenuous efforts of Ministry of IT and Pakistan Software Export Board (PSEB), the government grant tax holiday on IT exports for 3 more years till 2019.

Mobile phones are chargeable to sales tax at the rates of Rs. 300, Rs. 1,000 and Rs. 1,500 per mobile phone set depending upon categories of mobile phones.

It is proposed to merge sales tax rates of Rs. 300 and Rs. 1,000 per set into Rs. 650 per set.

It will promote use of information technology and will also reduce disputes on categorization of mobile phones.

Exemption from sales tax is also proposed to be provided on export of IT services. The tax incentives given to the IT and Telecom sector by the federal government will continue strengthening the sector and its growth.