Budget for 2010-11 announced no tax cut for Telecom industry. Earlier, there had been confusion in the industry at all levels that leveling of GST may have reduced taxes on Telecom sector from 19.5 percent to 17 percent.
However, after confirmation from FBR officials, Telecom experts and senior journalists, we can now safely say that there has been no change for any taxes on Telecom industry.
Here is the reason: 19.5 percent tax that telecom customers pay on services is FED or Federal Excise Duty and not the GST. Hence, leveling of GST at 17 percent will not impact any taxing on telephony services.
It is interesting that previous year, when FED was reduced from 21 percent to 19.5 percent, then everyone had termed it GST, but now we come to know that it was FED and not the GST.
Mr. Abdul Rehman, Director at FBR has confirmed us that taxation on telecom services come under FED, hence telecom customers will keep paying same amount of taxes as they were paying before budget.
Mr. Zahid Khawaja, telecom reporter at NNI (News Network International) also confirmed us the same.
Apology: We apologize for mis-representing the facts earlier. Though this happened due to a fact that media had been terming taxes on telecom as GST. Here and Here are examples. Whatever the reason was, we mis-represented the information and we are sorry for this.
Government of Pakistan has increased General Sales Tax from 16 percent to 17 percent, across the board for all the sectors.
Following is the excerpt from Finance Bill:
Increase in the rate of sales tax from 16% to 17%.
Increase in the rate of sales tax from 16% to 17% is aimed at distributing the burden of extra tax measures on all sectors of the economy.
Enforced through amendment in Section 3 of the Sales Tax Act, 1990, effective from the 1st July, 2010 and Notifications Nos. SRO 395 to 398(I)/2010, dated 05.06.2010.
This action will impact other economies but for Telecom sector GST has lowered to 17 percent, which was previously 19.5 percent.
Others taxes for telecom sector have remained unchanged, including Rs. 250 SIM activation tax and 10 percent withholding tax. Taxes for Import on telecom equipment and handsets didn’t change as well.
It merits mentioning here that GST was 21 percent earlier, which was lowered to 19.5 percent in year 2009-2010, and now it is further slashed by 2.5 percent. This reduction in GST is likely to help the customers and the government alike.
It is observed that reduction in taxes in past two years generated more tax amount for the government.
According to revised GST, consumption of each rupee will result 17 paisas of taxes compared to 19.5 paisa taxes previously.
Following are taxes/services charges for Rs. 100 Card:
- 10 percent withholding tax (is deducted at the time of card load)
- 5 percent service charges – deducted by all cellular companies (is deducted at card load)
Amount customer will get on card load of Rs. 100: Rs. 85
For Calls/SMS/VAS, another 17 percent tax will be deducted. For instance, if a 30 second call charges are Re. 0.68 then:
- Call Charges: Re. 0.68
- GST: 0.68Â X 17/100 = 0.12
- Total Call Charges, including tax, of 30 seconds (if call charges are Re. 0.68) = Re. 0.78
If Finance Bill gets passed by National Assembly, implementation of new GST on telephony services will start from July 1st, 2010.
Moreover, VAT will be imposed on Telecom services by replacing GST from October 1st, 2010.
ï‚· Increase in the rate of sales tax from 16% to 17% is aimed at distributing the burden of extra tax measures on all sectors of the economy.
Enforced through amendment in Section 3 of the Sales Tax Act, 1990, effective from the 1st July, 2010 and Notifications Nos. SRO 395 to 398(I)/2010, dated 05.06.2010.
chalo kahin tu tax kum hua.
now when we load card we get rs 85. you have mentioned tat gst is reduced but why after this we will get 70 instead of 85
no you will get 85 rupees, but on 85 rupees, when you will make call/send sms total tax deduction will be Rs. 14
I can’t understand what exactly you are saying, first do tell me that how much amount will I get at the time or recharge of 100,, and for example 0.70 paisa is per 30 second then how much i have to pay??
Amount customer will get on card load of Rs. 100: Rs. 85
For instance, if a 30 second call charges are Re. 0.68 then:
* Call Charges: Re. 0.68
* GST: 0.68 X 17/100 = 0.12
* Total Call Charges, including tax, of 30 seconds (if call charges are Re. 0.68) = Re. 0.78
Ok, now I understand, thanks for your reply
well explained!
I have one question why we are paying double tax? when we load card we pay tax when we call we again have to pay tax? I have no knowledge of law related to this, but what international law says about this ? double tax for one purpose ? please explain it thanks
Telecom customers pay two taxes and one service charge, i.e.
– Withholding Tax (10 percent)
– GST (17 percent)
– Service Charge (5 percent)
It’s not double tax, but its like tax of two different kinds. You should be thankful that there is no FED on telecom, or the equation could be uglier.
Both the taxes, withholding and GST, are the same thing. Actually withholding tax is ‘GST collected in advance before the transaction has happened’
At the end its only the GST and it is deducted in the form of ‘10% in advance (withholding tax)’ plus ‘tax deducted at the rate of 17% on our calls, sms, etc…’
The later is adjusted so that the overall tax amount is no more than PKR 17 deducted on each PKR 100 you use.
If they happen to deduct more tax, which they usually do, then you can claim a tax refund at the end of the year in your annual tax return. For that you have to ask you service provider to provide you with your annual tax summary but I guess the refund amount is so small that nobody bothers to get it refunded and further you have to be a registered tax payer to claim a refund (Part after ‘further’ needs confirmation)
inst 0.68+0.12 =0.80 ?
How come 0.78 ??
Moreover, I think GST is increased by 1%. Thus there will be 20.5% GST instead of 19.5% from July 1st.
aamir bhai aapka kia matlb?? hume kuch smaj ni i ha aap thora explan karin gay plzzzzzzzzzzz
Much better than before.. Good move for Telecom Sector. Also, 3G Tech is coming in the near future one of my Ufone’s friend told me.
I do not think that they have reduced the GST for telecom at least for now. they have increased from 16 to 17 for those which were paying 16 … so this does not apply to telecom ….
what he mentioned in his speech is that from 1st of OCT they are working on a new/refined GST system (a.k.a VAT) which will have 15% flat rate for every one ….
thats what I got from his speech :-)
Shahzad, i ve added excerpt from Finance bill, that suggests that GST is poised at 17 percent for all sectors.
VAT is yet to be decided, so let’s enjoy lesser tax until VAT comes.
VAT is likely to further decrease taxes on telecom services.
Moreover, no additional FED (Federal Excise Duty) was imposed on telecom services. Additional FED was added for following
– Gas
– Cigarettes
– Electronic Appliances
hahahah Dream on Mr yasir, Its going to take *atleast 4-5* years…Mark my words..lol
Ohh Thats great.
Isnt the 5% Service charge on every card recharge or easy load way to high, Admin? No wonder the Telecom Giants are earning in Millions at the cost of the poor consumer.
come on companies impose 2.5% tax (lowere to 17% now instead of 19.5%) in any form like service tax, line rental, service maintenance tax, line usage tax, etc etc
Don`t worry companies will adjust this minute 2.5% and will continue to suck blood.
There is no GST on Air Time. Its WHT 10%, 5% Service Charges & FED 19.5%. Rs.100 card deduct initialy 10% WHT & 5% Service Charges that becom Rs.85. Than FED 19.5% paid with every call. WHT & Service charges paid in advance where as FED is based on usage.
VAT can make the difference in taxes but in GST case Govt will not cut
“However, after confirmation from FRB officials”
Its FBR.
ha ha ha
zabardast ……
Subject kardari’s tax on Rs 100 scratch card(cellular companies)is Rs 2.33
in musharaf regime we are getting 90.91 from a rs 100 card 100/1.1= 90.91
but democratic government included a new tax of 5% so we should receive 100/1.15= 86.96 but we are receiving 84.93 why because Mr. 105 kardari is getting commission of Rs 2.33
so 100-2.33=97.67
now 97.67/1.15=84.93
thanks to Mr kardari instead of 10% he is getting just 2.33%
Yeah, that is what everyone says, but does it really work?