| Collectors directed to charge sales tax on import
of computer networking equipment |
| SOHAIL SARFARAZ |
.......ISLAMABAD : In
order to resolve a major tax ambiguity in the information technology sector,
the Central Board of Revenue (CBR) has directed all collectors of sales tax
to charge general sales tax (GST) on the import of computer networking equipment
and data communication devices. The Sales Tax Department has issued this ruling
after receiving bulk of queries from the leading importers of computer hardware,
who were unable to decide whether computer networking apparatus falls under
the exemption category or not.
.......Now, the department has issued
these instructions for levying GST on such equipment.
....... The ruling issued by CBR
on Saturday reads as "Serial number 45 of the Sixth Schedule of the Sales
Tax Act, 1990 grants exemption to computer hardware including laptops, notebooks,
PCs, mainframes and their peripheral units and parts thereof. Networking
equipment and data communication devices do not constitute peripheral units
of computer hardware or parts thereof having multiple uses/applications and
therefore, are not exempt from sales tax."
.......The CBR has also conveyed
separately to the collectorates of customs to follow the procedure adopted
under the new order.
....... The importers and suppliers
of such equipment have out rightly rejected this decision and demanded of
the government to review it in the light of the presentations earlier made
by them to the tax authorities. They were of the view that these devices
connect and operate only on the periphery of computers and allow them to
exchange information by executing specific tasks. Technically, such equipment
are passive in their function and cannot carry out any task on their own.
Networking equipment and data communication devices are also peripheral devices
to computers and such falls within the definition of the computer hardware.
.......In fiscal budget 2001-2002,
the government has amended First Schedule of the Custom Act to introduce
a new PCT heading 9908.0080, which attracted zero-rate customs duty covering
items relating to the computers networking, which were earlier treated as
apparatus of communication sector. The exemption of duty was available to
items encompassing LAN bridge, hubs and routers, etc. The newly introduced
Chapter 99 of the Pakistan Custom Tariff has specified names of hundreds of
computer related items exempted from customs duty.
....... Under the new Sixth Schedule
of the Sales Tax Act, 1990, the exemption of GST has been available to computer
hardware i.e. laptops, notebooks, PCs, mainframe and other peripheral and
parts thereof and computer software. However, the serial numbers 45 and 48
of the Schedule do not cover LAN bridge, hubs, routers and other networking
equipment.
....... The sales tax officials
have refused to include networking equipment in the Sixth Schedule on the
grounds that such items are not a part of computer hardware. On the contrary,
the customs authorities have already exempted networking equipment from the
payment of customs duty in fiscal budget 2001-2002.
....... Sources said that over 95
percent of the importers and suppliers of networking apparatus were unaware
of the fact that such devices were not exempted from (GST). They continued
to avail this exemption on the presumption that such items are exempted from
GST. Both the buyers and sellers were treating such equipment as exempted
items. However, the situation will become further complicated when the importers/suppliers
will face auditors and Charted Accountant Firms by the end of current fiscal.
.......The First Schedule of the
Custom Act was revised to introduce a new PCT heading 9908.0050 in budget
2001-2002, which attracted zero-rate customs duty covering items relating
to the computers and information technology. The exemption of duty was available
to the following items; computers, automatic data processing machines, servers;
LAN bridge, hubs, routers; multi-static access units, SNA cluster controllers;
software of CD-ROM, magnetic tapes, diskettes and different types of items
related with the networking and computer peripherals. These items were brought
under the computer regime, which were earlier treated under the communication
sector.
.......The serial number 45 of the
Sixth Schedule of the Sales Tax Act, 1990 does not cover LAN bridge, hubs,
routers and other networking equipment. Under serial numbers 45 and 48 of
the Schedule, the exemption of GST has been available to computer hardware
encompassing lap tops, note books, PCs, mainframe and other peripheral and
parts thereof and computer software.
.......Copyright 2001 Business
Recorder (http://www.brecorder.com) |
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