TechLahore

The IT industry in Pakistan was pretty miffed about the 15% GST imposition that was part of the previous budget, and talk of having it removed picked up the volume right after the budget was passed. Then, during the caretaker government’s tenure, Abdullah Riar, the then IT minister, promised that the GST would be lifted. Clearly, as we discussed at the time, he didn’t have the longevity to ensure it would happen, but such recommendations come from the Ministry and it seemed like the Babus at the appropriate ministries were bought into the concept. The issue with this GST is that it makes PCs more expensive and hence, causes adoption to slow down. We still have a long way to go and there is a lot of room for expanding the PC footprint in Pakistan, so there is a good argument to be made for why the tax needs to be nixed. On the other hand, with the recent issues around large outflows of foreign exchange to fund the trade deficit, I suppose the Finance Ministry has a point here as well; unless the bulk of the funds going toward PC purchases are staying within Pakistan, everything needs to be done to reduce the forex outflows. What a surprise! There’s two sides to this picture.

The perfect solution of course, would be for a local manufacturer to add greater value domestically and not just focus on assembly. While companies like Inbox and Raffles have done well in the local market, they are essentially glorified integrators. How do we add more value on Pakistani soil to prevent forex outflow problems? The GST issue may now be tied up with this…

The Business Recorder has an update on the issue and the continued demands of the business community to kill the tax:

Withdrawal of 15 percent GST on ICT industry demanded

KARACHI (April 29, 2008): Imposition of 15 percent GST on information and communication technology industry (ICT) has severely hampered the industry’s growth as annual growth rate of PC/server market in Pakistan declined to 9.6 percent in 2007 against 16.4 percent in 2006.

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