KARACHI - Removal of 15 per cent General Sales Tax (GST) on computer hardware is likely in the coming budget, which will improve computer penetration but broadband penetration will remain relatively unaffected. On the other hand, Subscriber Identity Module (SIM) activation tax is likely to remain at Rs500, analysts said. Removal of the 15 percent GST on computer hardware would bode well for computer sales. In January 2008, Caretaker Federal Minister of IT had alluded to this move in a meeting with the Pakistan Computer Association, with a view of raising penetration to 50 percent.   This would also potentially increase the target market for broadband users. Analysts believe it is likely that budget 2008-09 will do away with the 15 percent GST tax but do not foresee a major impact on broadband operators for now, given that broadband penetration also depends on a variety of other factors e.g. broadband pricing and that broadband offtake has been relatively slow. It may be noted here that since this sales tax was imposed last year, the general IT industry in Pakistan, local PC/Server manufacturers and IT retailers, have strongly advocated its removal. The 15 percent GST is currently applicable to all IT purchases. Critics of the GST tax on computer argue that it is too early to impose any inhibitors on the growth of the PC industry and PC/Internet adoption in Pakistan. The Government's oft-stated goal is to achieve 50 percent PC penetration in the population in the next 3-5 years; in number terms, this would mean about 80-90 million PCs in use in Pakistan. These targets will clearly have to be curtailed if the less affluent rural population is expected to pay a 15 per cent premium on the price of a PC. Analysts expect that SIM activation tax is likely to remain at Rs500 in the coming budget, they added that SIM activation tax has already been reduced twice, from Rs2,000 to Rs1,000 in 2004 and then again from Rs1,000 to Rs500 in 2005. Analysts believe it is unlikely that government will provide any further concessions in this regard, especially in light of the fact that total SIM activation tax was Rs17.6 billion last year and comprised 28.8 per cent of cellular mobile segment tax contribution to the exchequer. A study by Deloitte indicates that the elimination of the current PKR500 activation tax on new SIMs would lead to an increase of 3.6 percent-4.3 percent in GDP generated by Pakistan during 2007-2017. The study also indicated that reduction in activation tax from PKR500 to PKR250 would result in 25 percent growth in revenues and enable the authorities to generate 32 percent additional revenue from the industry. In addition to the SIM tax, analysts said that increased focus on revenue collection could boost taxes on cell phone Imports, they expect heavy import duties on luxury consumption items such as mobile phones which could potentially have a slow down effect on further cellular penetration growth. However, analysts believe the possibility of this happening is slim given that there is also a large secondary market for both used and stolen cell phone sets at lower prices, catering to the lower socio-economic strata of society.