SRO 590(I)/2017: Sales Tax Exemption on IT/ITeS Exports
Briefing
By Rahnuma · AI-generatedSRO 590(I)/2017 is a statutory regulatory order issued by the Federal Board of Revenue on July 1, 2017, granting complete exemption from sales tax on the export of Information Technology (IT) services and IT-enabled Services (ITeS). The exemption is issued under the authority of section 3(2A)(c) of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XLII of 2001) read with section 13(2)(a) of the Sales Tax Act, 1990, with approval of the Federal Minister-in-charge. The notification specifies that the 'whole of sales tax' is exempted, meaning 100% exemption from sales tax on qualifying exports. This policy measure aims to strengthen Pakistan's IT sector competitiveness in global markets and promote export-oriented growth in the technology services industry.
Plain-language explanation
This is a government notification that removes sales tax from IT and IT-enabled service exports. In simple terms, if your Pakistani company sells software, IT consulting, data processing, or call center services to foreign clients, you no longer have to pay sales tax on those export revenues. For example, if a Karachi software company earns Rs. 10 million from a US client for app development, that entire Rs. 10 million is exempt from sales tax under this order. Previously, such exports may have been subject to sales tax at standard rates. The FBR issued this exemption to make Pakistani IT companies more competitive internationally and to encourage growth in the technology services export sector. This is a direct cost reduction for IT exporters and should improve profit margins on foreign contracts.
Compliance & opportunity checklist
- Verify your exported services qualify as IT or IT-enabled services before claiming the exemption under this SRO.
- Update invoicing and accounting systems to reflect zero-rated sales tax treatment for qualifying export transactions.
- Maintain detailed records of export contracts, service descriptions, and payment documentation to support exemption claims during audits.
- Confirm that your company is registered under the Sales Tax Act, 1990 to properly claim the exemption.
- Check if provincial tax authorities have issued corresponding exemptions for IT/ITeS exports in your operating jurisdiction.
- Consult with a tax advisor to ensure compliance with related provisions of the Income Tax Ordinance, 2001 for IT export income treatment.
- Retain a copy of this SRO and the notification reference C. No. 4/22-STB/2017 in your compliance records.
Key numbers
Sales Tax Exemption Rate
100 percent
· Section 3(2A)(c) ICT Tax Ordinance, 2001
Effective Date
01-Jul-2017
· SRO 590(I)/2017
Applicable Sales Tax Rate Without Exemption
16 percent
· Sales Tax Act, 1990
Documentation Requirement for Audit Trail
Maintain records
· SRO provisions implied
Notification Reference Number
C. No. 4/22-STB/2017
· SRO header
Legal Basis - ICT Ordinance
Section 3(2A)(c)
· XLII of 2001
Legal Basis - Sales Tax Act
Section 13(2)(a)
· Sales Tax Act, 1990
Categories of Services Exempted
2 categories
· SRO text
Frequently asked
By Rahnuma · AI-generatedWhat services qualify for the sales tax exemption under this SRO?
The exemption covers export of IT services and IT-enabled services (ITeS). The SRO grants 100% exemption from sales tax on these categories of exported services, as specified in the notification text.
What is the legal authority for this exemption?
The exemption derives authority from clause (c) of sub-section (2A) of section 3 of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, read with clause (a) of sub-section (2) of section 13 of the Sales Tax Act, 1990. The order was issued with Federal Minister-in-charge approval.
When did this exemption become effective?
The notification was issued and came into effect on July 1, 2017, bearing reference C. No. 4/22-STB/2017. The exemption applies from this date for qualifying IT and ITeS export services.
Does this apply to both federal and regional tax jurisdictions?
This SRO is specifically issued under the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, applying to services within ICT jurisdiction. IT and ITeS exporters operating in other provinces should verify corresponding provincial tax treatments under their respective sales tax on services frameworks.
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Income Tax Ordinance 2001: Amended (Sections 133, 143, 101)
The sales tax exemption under SRO 590 complements the Income Tax Ordinance provisions (sections 133, 143, 101) by removing sales tax burden on IT exports, creating a dual tax relief mechanism for the sector.
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Document 34 is an FBR clarification issued in 2024 that explicitly interprets and applies the sales tax exemption established by SRO 590(I)/2017, making the later document directly dependent on the foundational exemption.
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SRO 590(I)/2017 establishes the original sales tax exemption for IT/ITeS exports, and the 2024 FBR Clarification provides compliance guidance and scope interpretation for this exemption.
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