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Dear All,
If you remember, I had cautioned everybody about the
change in August 2001. However, nobody took notice of this.
Under the new tariff, all computer equipment is subject to
5% custom duty and 15% sales tax.
Clearing under chpt. 99, is not meant for organizations
who intend to import for sale purpose.
The matter has already been taken up with Mr. Salman
Ansari, who has included the issue in the letter sent by MoST to
CE.
We need to take up the matter, may be with the Minister of
Finance from ISPAk platform.
Regards
----- Original Message -----
Sent: Monday, October 22, 2001 11:38
AM
Subject: ISPAK: Sales TAX
| 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
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