Sindh Government Criticized For Imposing Taxes On IT Industry

Information technology industry is not happy with Sindh Government. Reason being, the government is imposing taxes on IT companies unfairly.

It was in the Sindh Budget 2017-18 that the government made this announcement. They declared that they will continue to impose taxes on export of IT enabled services which include call centers and BPO services.

No other province has imposed sales taxes on export of IT services. Federal government has released income tax for three years on IT services companies and new IT companies in Federal Budget 2017-18. Where all other provinces have not enforced this tax, it is quite obvious that the IT industry of Sindh is in an uproar.

Also read: Punjab encouraging youngsters to be part of Information Technology

Along with the point of IT companies that federal government has exempted sales tax on export of IT services from Islamabad and similar federal areas, the other point is that as per Income Tax Ordinance export income tax exemption is granted till June 30, 2019. This is applicable on all exporting Information Technology and Information Technology Enabled Services companies. So how can the provincial government impose tax in the recent budget on these service companies?

Pakistan Software Houses Association for IT & ITES had conversations with Sindh government and revenue board related to the extreme burden of export services sales tax. It was anticipated that the government would facilitate the IT industry in Sindh Budget 2017-18. They did reduce sales tax from 13% to 3% but unlike other provinces didn’t completely end it.

This also makes one wonder whether Sindh government really wants to increase export and create employment in the territory or not?

Sales tax is a customer tax and it should be paid by the consumer not the service provider as per IT service providers. In export of items, the customer is not present in the country; therefore the tax isn’t applicable at all. Sindh government wants service provider to pay consumer tax out of their own money, which is completely unfair.

10 months export data of IT service companies is issued by State Bank of Pakistan, starting from July 16 to April 17. It accounts for $532.91 million, from which $67.09 million is contributed by call centers. Now majority of export might sit to other provinces or countries that are not unfair while imposing taxes.

Future of Sindh in export sector does not sound promising at all.