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FBR Updates Definition for IT and IT-Enabled Services

The Federal Board of Revenue (FBR) Thursday has imposed a 5 percent sales tax on 17 categories of “IT services” and “IT-enabled services” including software development, software maintenance, system integration, web design, web development, web hosting, and network design.

The FBR has expanded the list of “IT services” and “IT-enabled services” for collection of 5 percent sales tax from the service providers falling within the jurisdiction of Islamabad Capital Territory (ICT).

The FBR has issued S.R.O. 77 (I)2021 to amend S.R.O. 495(I)/2016, dated the 4th July 2016 relating to the levy of sales tax on services rendered or provided in Islamabad Capital Territory.


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Following services are now subjected to 5 percent sales tax within the jurisdiction of Islamabad Capital Territory (ICT): “IT services” including software development, software maintenance, system integration, web design, web development, web hosting, and network design.

The “IT-enabled services” included inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs] and insurance claims processing.

Under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, 5 percent sales tax is applicable on services provided by software or IT-based system development consultants. Under the S.R.O. 77 (I)2021, the FBR has explained the scope of levy of sales tax on “IT services” and “IT-enabled services”.


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SRO77 (1)12021 issued by the FBR said,

“In exercise of the powers conferred by clause (a) of sub-section (2A) of section 3 of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XL II of 2001), read with clause (b) of sub-section (2) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the following further amendments shall be made in its Notification No. S.R.O. 495(1)/2016, dated the 4th July 2016.

For the purpose of this entry — “IT services” include software development, software maintenance, system integration, web design, web development, web hosting, and network design; and “IT-enabled services” include inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs] and insurance claims processing.”, the notification added.

 

Update: An earlier version of this news had some incorrect information, which has been fixed now. We regret the mistake and the inconvenience it may have caused.

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