Telecom Customers Paid Rs. 36.35 Billion as Taxes in H1 2010-11

Telecommunication industry remained a major contributor to national exchequer in terms of multiple taxes paid by costumers. These revenues have shown growth with accelerated pace on the increase usage of different telephony service by millions of customers in the country.

The customers using different telephony services have paid Rs 23.429 billion on the account of General Sales Tax (GST) in the first half of current fiscal year 2010-11, Federal Bureau of Statistics (FBR) quoted in its recently released report.

This GST amount has shown 8 percent growth in terms of its value compared with the corresponding period of fiscal year 2009-2010 in which 21.701 billion rupees were collected by the tax authorities.

GST on telephony services is originally Federal Excise Duty (FED) but it is collected in the mode of GST on every service including voice, text, value-added, subscription of call packages and SMS bundles.

The GST/FED imposed on telephony services is charged at 19.5 percent, which is highest among all sectors compared with their GST rate of 17 percent.

Telecom sector is the second major spinner among all sectors after petroleum that contributed heavily to the overall generation of GST. Its share in the overall GST is stood at 16.7 percent as compared with last year which was slightly lower and stood at 16.2 percent.

The collection from telecom sector, the second major source of sales tax, has improved by 8 percent due to increased usage of the telecom services by 9.2 percent, FBR mentioned in its report.

The growth in services utilities were seen despite millions of flood affected subscribers were unable to use telecom services for couple of months (July to August 2010).

Telecom sector has generated Rs 12.921 billion taxes on the account of Withholding Tax (WT) in the fiscal half of current fiscal year 2010-2011, FBR reported. These figures showed growth of 18.6 percent as compared with Rs. 10.89 billion WT paid by customers in the same period of last fiscal year.

The share of telecom sector in the overall WT collected by FBR is stood at 8.5 percent in July-Dec 2010. The sector is the fourth major contributor among all sectors after contracts, imports and salary heads.

The WT was paid by customers as direct tax at the rate 10 percent in the first half of current fiscal year, which has recently been increased to 11.5 percent by the government. This tax is deducted on the recharge of load/balance through scratch card or easy-load from prepaid customers whereas postpaid or fixed-lined customers pay it at the time of bill payments.

Overall the users of telephony services have paid Rs 36.35 billion in the July-December 2010 as against the figure of Rs 32.591 billion paid in same months of 2009, showing 11.53 percent growth.

These all direct (WT) and indirect taxes (GST) are paid by customers but deducted by telecom operators including landline, cellular, and wireless as withholding agent of their subscribers. Later, taxes are transferred to revenue collecting authority, FBR, by operators therefore there is negligible incidence of tax evasion in telecom sector.

It is pertinent to note here that that a total tax of Rs. 36.35 billion (GST + with holding tax) translates into a combined revenues of Rs. 92.86 billion rupees for all telecom companies in first 6 months of fiscal year 2010-11.