ISLAMABAD, April 16: The 15 per cent general sales tax (GST) imposed on computer hardware and accessories has not only halved Pakistani PC/server shipments but has also adversely affected foreign investment.

"The big leap made by the IT industry is being undermined by the tax," Managing Director Pakistan Software Export Board (PSEB) Yousuf Hussain told Dawn on Monday.

He voiced his concern after Springboard Research, a private market research company in its Asia Emerging Countries (AEC) quarterly tracker, pointed out that Pakistani PC/server market had suffered setback in 2006.

AEC attributed the lower than expected market performance to the 15 per cent GST imposed in June 2006 resulting in higher prices for IT products. Shipments grew just 16.4 per cent compared to over 30 per cent before the tax was imposed.

"Local assemblers are the worst hit from the GST. The tax also scares foreign investors like China which wants to invest in Pakistan and set up manufacturing plants to produce computers for the entire region," the MD PSEB said.

There were no corporate taxes on Turkey's IT industry. All the employees in Turkish IT industry were also exempted from personal income tax, Mr Hussain said adding, "Even the $36 billion India IT industry is also exempted of import duties,"

To counter CBR's rationale for imposing the GST to increase government income he said, "In three to four years the industry will grow to the extent that personal income tax collected from employees in Pakistan's IT industry will exceed all the taxes put together."

Describing the GST as a "repressive" step by the government, Convener Internet Service Provider Association Wahaj Siraj said It was a serious blow to computer industry."

"The GST is a barrier on education, e-trade, e-governance and e-commerce because all these areas depend on availability of computing devices at cheapest prices," said former adviser for IT and Telecommunications Salman Ansari.