Islamabad, July 4, 2023: The Federal Board of Revenue (FBR) has mandated a 15 percent sales tax on IT services and IT-enabled services within the jurisdiction of Islamabad, the capital city of Pakistan. This decision, effective from July 1, 2023, aims to enhance tax revenue collection in the IT sector.
The FBR, as the authorized body responsible for collecting sales tax on services in Islamabad, clarified the scope of IT services and IT-enabled services subject to the 15 percent sales tax. The following definitions were provided:
READ MORE: FBR Enforces 15% Sales Tax on Services Provided by Hotels in Islamabad
(a) “IT services” encompass a range of activities such as software development, software maintenance, system integration, web design, web development, web hosting, and network design.
(b) “IT-enabled services” include but are not limited to inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, human resources (HR) services, telemedicine centers, data entry operations, cloud computing services, data storage services, locally produced television programs, and insurance claims processing.
By imposing this sales tax on IT services and IT-enabled services, the FBR aims to streamline taxation practices and ensure that the IT sector contributes its fair share to the country’s revenue generation efforts.
READ MORE: FBR Takes Action: Principal Appraiser of Karachi Customs Suspended
The decision is aligned with the evolving landscape of the IT industry and its increasing significance in driving economic growth. It also reflects the government’s commitment to implementing equitable taxation policies across various sectors, including the rapidly expanding IT sector.
IT service providers and IT-enabled service providers operating in Islamabad are advised to comply with the new sales tax regulations. Failure to do so may result in penalties and legal consequences. The FBR will monitor compliance closely and take appropriate actions against non-compliant entities.
The introduction of this 15 percent sales tax on IT services and IT-enabled services is expected to contribute to the overall economic development of Islamabad and bolster revenue collection efforts. It will also support the government’s initiatives to create a conducive environment for IT businesses and promote the digital transformation of the economy.
READ MORE: Progressive Rates of Super Tax with Increased Threshold Implemented from July 2023
IT service providers and IT-enabled service providers are encouraged to familiarize themselves with the FBR’s guidelines and ensure proper tax compliance to avoid any disruptions to their operations and potential penalties.
The FBR’s decision to impose a 15 percent sales tax on IT services and IT-enabled services in Islamabad reflects the government’s commitment to a fair and sustainable taxation system. It is anticipated that this measure will contribute to the growth of the IT sector while generating additional revenue for the development of the capital city.
