ISLAMABAD - Information Technology industry on Tuesday criticised the Sindh government for imposing taxes on IT companies.

It is pertinent to mention here that the provincial government has announced through the Sindh Budget 2017-18 that it plans to continue tax on export of Information Technology Enabled Services (commonly known as call centres and BPO services).

The industry representatives said that no other province has imposed sales tax on exports of services and the federal government has in fact announced a three-year income tax exemption for new Information Technology and Information Technology Enabled Services companies through the Federal Budget 2017-18 and subsequent Finance Bill 2017. They pointed that the federal government has also announced sales tax exemption on exports of IT services from Islamabad and other federal territories. On the other hand, the Income Tax Ordinance already grants export income tax exemption till June 30, 2019 to all exporting Information Technology and Information Technology Enabled Services companies, they added.

Pakistan Software Houses Association for IT & ITES (P@SHA) had been in talks with the Sindh government and Sindh Revenue Board on the matter of export services sales tax imposition for over a year, and a long due favourable policy announcement was expected through the Sindh Budget 2017-18, they added. However, the announcement, through the Sindh Budget 2017-18, proposes to reduce export sales tax from existing 13 percent to new 3 percent instead of abolishing it like other provinces. This has raised concerns over the Sindh government’s commitment of creating jobs in the province and increasing exports, they added.

They said that sales tax being a consumer tax is not to be borne by the service provider and is intended to be paid by the customer. Therefore, sales tax application remains a matter for domestic sales and in export scenarios where the customer is not in Pakistan sales tax is not applied across any industry. The Sindh government in a first of its kind move wants businesses in Sindh to pay sales tax on exports, which translates into paying a consumer tax from the service provider’s own pocket, they said.

The State Bank of Pakistan (SBP) has issued 10 month (July 16 to April 17) exports data for IT & ITES which stands at $532.91 million out of which call centres contribute $67.09 million. Bulk of this export will now either move to other provinces or tax friendly countries, depriving Sindh of the potential export opportunities and employment for thousands of local young individuals, they added.