The Finance Bill 2023 proposed to exempt freelance exporters exclusively dealing in export of IT and IT enabled services from sales tax. However, this amendment was not made part of the Finance Act 2023. This means that the export of IT and IT enabled services undertaken by freelance exporters will now be taxed at the applicable rate of sales tax under the Islamabad Capital Territory (Tax on Services) Ordinance 2001.
This is a setback for the IT sector, which had been lobbying for the exemption. The exemption would have helped to boost the sector and create jobs.
The government has said that the exemption was not feasible due to fiscal constraints. However, the IT sector has argued that the exemption would have been a small price to pay for the economic benefits it would have generated.
The withdrawal of the exemption is likely to have a negative impact on the IT sector. It is expected to lead to higher costs for businesses and make it more difficult for them to compete in the global market.
