Withholding Tax on Cellular Usage in Northern Areas – Illegal

The Federal Tax Ombudsman has directed the Revenue Division to ask the Federal Board of Revenue (FBR) to work out a mechanism in consultation with the Pakistan Telecommunication Authority (PTA) for exempting bona fide mobile phone users based in the Northern Areas from withholding tax.

In an order on a complaint filed by Qamar Abbas, President of the Teacher Association Baltistan, Federal Tax Ombudsman Dr Muhammad Shoaib Suddle directed the FBR and PTA authorities to file a report on compliance with the order in 60 days. In his findings and recommendations, the tax ombudsman observed that the complainant stated that though the income tax law has not been extended to the Northern Areas, withholding tax is imposed on telephone and cellphone users.

The complainant argued that a verdict of the Supreme Court issued in 1999 had declared that the imposition of withholding tax in the Northern Areas is illegal.

However, a representative of the Revenue Division contended mobile phone companies deduct the tax electronically and sell prepaid cards on wholesale basis in the settled areas and the deduction of advance tax on the sale price is also made in settled areas.

He maintained that it was not possible for the income tax department or mobile phone companies to devise a separate mechanism for the residents of NAs, “since there was no bar on them to reside in or travel to other parts of the country.” However, the tax ombudsman observed that the imposition of withholding tax on mobile phone users living in the Northern Areas was contravention of the constitution. The ombudsman also ordered the Revenue Division to direct the FBR to make special arrangements for the mobile phone users of NAs to get the dues refunded which they have paid as withholding tax.

Source: The News

Tip: Show your identity if you are from Northern Areas and also using cellphone. This is  your chance of getting tax relief!!!