Value added tax, if imposed, will reduce telecom tariffs for the consumers. Unlike any other sector, Telecom consumers pay highest level of general sales tax in the country, i.e. 19.5 percent.
If value added tax is imposed (and is replaced with GST), which is 15 percent of actual value of products/services, taxes on telecom sector will shrink from 19.5 percent to 15 percent.
It merits mentioning here that taxes on telecom industry were lowered to 19.5 percent from 21 percent last year.
Though we are not sure about the imposition of VAT in upcoming budget, however, government is firm that VAT will be imposed on all services in the country from July 1st, 2010.
Cellular companies have already expressed urge for lower taxes on the telecom industry. Particularly in recent Telenor Group officials’ meeting with BOI chairman. Earlier, all cellular companies requested the same during their chiefs’ meeting with Sardar Latif Khosa, Minister for IT and Telecom.
It merits mentioning here that telecom sector leads in taxes’ contribution and foreign direct investment for the country.