LAHORE: The information technology sector has deplored the FBR’s recent proposal regarding withdrawal of income tax exemption on the export of IT services, and its replacement with a Tax Credit Scheme, wherein tax credit is subject to fulfilment of many conditions such as filing of tax withholding statements and sales tax returns. “By coming up with these conditions, FBR appears to have ignored the fact that export of IT services is exempt from sales tax, and hence there appears no justification to ask the industry to file sales tax returns.”The association contended that sales tax on services was a provincial subject and was, therefore, outside the FBR’s domain. “FBR has further required full withholding of income tax on all payments and filing of withholding tax statements, which will open a pandora box of tax inquiries whereby not just the so-called ‘tax credit’ be disallowed for alleged non-compliance with withholding tax regime on the whim of the tax officer, but additional tax demands will be raised for tax not withheld,” the association said. [email protected] further noted that exemption available to startups for initial three years after registration with PSEB is also proposed to be withdrawn and replaced by the same tax credit scheme. [email protected] urged the prime minister to take action, invite industry stakeholders to discuss their concerns and discourage any such proposals that could hamper industry growth.

Source: Pakistan Today March 13, 2021 18:00 UTC