Preparing an incentive package for IT sector in the upcoming budget 2018-19, the Ministry of Information Technology and Telecommunication (MoITT) has proposed extension of zero-rated income tax to IT exports, grant of industry status, removal of 2-8 percent minimum tax on services, and abolition of customs duty and sales tax on import of specific items, sources revealed.
Sources told Business Recorder that MoITT package for IT sector covers enhancement in existing incentives, rationalization of duties/taxes and simplification of tax regime, envisaging promotion of local assembly/manufacturing of IT hardware and 100 percent increase in software exports. The draft package would be proposed to the Federal Board of Revenue (FBR) for inclusion in the Finance Bill 2018-19.
The ministry envisaged increasing the country's IT exports to $ 10 billion by 2020 and accelerating the digitization of key economic sectors locally. The IT sector's reported exports remained $650 million against the potential of $5 billion for 2016-17.
IT/ITeS industry is currently a flourishing sector in comparison to other sectors of the economy. In order to further this growth momentum and take the sector to the next level, the Ministry of IT is working on an incentives package for the sector in collaboration with relevant stakeholders that will increase the IT exports.
Minister of State for IT & Telecom, Anusha Rehman along with secretary IT and other senior officials of the ministry have also called on Prime Minister Shahid Khaqan Abbasi to discuss the incentives package. The incentives package includes various measures and is being designed after a thorough analysis of other important IT destinations of the region like Philippines, China, Bangladesh and India.
The package will overcome the challenges faced by the IT/ITeS industry in comparison to the competing & regional economies. Incentive package tackles issues like high taxation on IT/ITeS companies, lack of quality physical infrastructure and limited domestic opportunities.
The package as part of the Digital Pakistan Policy includes fiscal proposals such as extension of zero rated income tax regime to IT exports till 2030 (currently set to expire in 2019), removal of 2-8 percent minimum tax on services as well as removal of customs duty and sales tax for imports on specific items. Furthermore, 5 percent cash reward is also being proposed to encourage the inward flow of IT export remittances in proper codes.
Other fiscal measures include Special Economic Zones (SEZs) for IT/ITeS sector to encourage the investment in IT ready physical infrastructure in the country, an issue currently hampering the growth in the sector. In addition to tech SEZs, a land allocation model for public-private partnerships is also being devised.