FBR Updates Definition for IT and IT-Enabled Services

The Federal Board of Revenue (FBR) Thursday has imposed a 5 percent sales tax on 17 categories of “IT services” and “IT-enabled services” including software development, software maintenance, system integration, web design, web development, web hosting, and network design.

The FBR has expanded the list of “IT services” and “IT-enabled services” for collection of 5 percent sales tax from the service providers falling within the jurisdiction of Islamabad Capital Territory (ICT).

The FBR has issued S.R.O. 77 (I)2021 to amend S.R.O. 495(I)/2016, dated the 4th July 2016 relating to the levy of sales tax on services rendered or provided in Islamabad Capital Territory.


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Following services are now subjected to 5 percent sales tax within the jurisdiction of Islamabad Capital Territory (ICT): “IT services” including software development, software maintenance, system integration, web design, web development, web hosting, and network design.

The “IT-enabled services” included inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs] and insurance claims processing.

Under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, 5 percent sales tax is applicable on services provided by software or IT-based system development consultants. Under the S.R.O. 77 (I)2021, the FBR has explained the scope of levy of sales tax on “IT services” and “IT-enabled services”.


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SRO77 (1)12021 issued by the FBR said,

“In exercise of the powers conferred by clause (a) of sub-section (2A) of section 3 of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XL II of 2001), read with clause (b) of sub-section (2) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the following further amendments shall be made in its Notification No. S.R.O. 495(1)/2016, dated the 4th July 2016.

For the purpose of this entry — “IT services” include software development, software maintenance, system integration, web design, web development, web hosting, and network design; and “IT-enabled services” include inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs] and insurance claims processing.”, the notification added.

 

Update: An earlier version of this news had some incorrect information, which has been fixed now. We regret the mistake and the inconvenience it may have caused.


  • Shameful move by the government.

    Instead of promoting the IT culture, teaching programming to kids, they impose these taxes.

    People already pay 200% duty/extra money when buying computer hardware.

  • i think telented people move to Pakistan
    No need to IT & Software Company
    i think any software buy to Europe
    Only tax tax in Pakistan

  • I didn’t get this completely. Is it something new and how this would affect the owners. 16% was already been there since ages when transferring money locally B2B.

    is it affecting the foreign remittance for IT companies which is tax excepted??

  • FBR is a worthlesa organization as most of the taxes are collected in the shape of Sales tax withholding taxes and corporate taxes by the Companies. Instead of collecting tax from the evaders they are discouraging the all software Companies to promote business in Pakistan

  • Other countries don’t *fix* something which isn’t broken.., FBR is breaking something before it’s even made.

    Instead of providing incubation, give taxation.

    Bravo.

  • Previous govt. Made IT industry tax free to attract foreign remittance and IT business till 2024. Current one is trying hard to juice out the remaining business out of country.. bravo.
    Jab ay ga imran nikly gi sabki jan…

  • Imran Khan has been a big disappointment for his diehard fans, his party workers, and his promoters; not to mention his previous life-partners and the other general public not necessarily his admirers.
    May Allah save Pakistan.

  • Its an old Tax which was implemented in June 21, 2018. There is no change in tax except the definition. Through this notification only “IT Services” and “IT enabled services” are explained.

  • I see lot of people are commenting here with reading the article, No new tax is being introduced only definition of IT & IT-enabled has been updated, We are giving 5% sales tax on it services for past many years

  • We were already paying 5% tax on services and its been in place since 2018. The only change i read was 16% sst which was quite a heart attack.

    Tuannu lavey maula ..


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