Government Announces Slight Cut in Taxes on Telecom Sector

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Federal government has proposed a slight reduction in taxes on telecom services for the year 2014-15.

According to initial information – based on Mr. Ishaq Dar’s budget speech for 2014-15 – federal government has proposed to reduce withholding tax (WHT) on telecom services from 15 percent to 14 percent.

It maybe recalled that Government had increased WTH from 10 percent to 15 percent last year.

Cellular companies had urged a 5 to 10 percent reduction in WTH.

Moreover, government announced that it will withdraw FED on telecom services from those provinces that have imposed GST on telecom services.

Government has further proposed to reduce GST (General Sales Tax) from current 19.5 percent to 18.5 percent in areas where FED will continue to be collected.

It merits mentioning here that government collects FED (or Federal Excide Duty) from telecom services in shape of GST. Meaning that 19.5 percent GST is actually FED, which will not be called GST in provinces that collect taxes on provincial level.

Just in case if you don’t remember, after National Finance Commission (NFC) Award, Sindh, KPK and Punjab collect GST on provincial levels. Hence FED will be renamed to GST in these provinces.

However, In Capital (Islamabad), Balochistan and GB areas, these taxes are still called FED and hence a tax reduction of 1 percent is proposed for customers in Islamabad, Balochistan and GB areas.

Three provinces may also announce to collect 18.5 percent GST – instead of current 19.5 percent — on telecom services to match tax rate of federal capital, Balochistan and GB. But that will be announced during provincial budgets.

Things to Note:

For those who are unable to understand the technical language and complications from above, there is a reduction of 2 percent in taxes on telecom services.

  • 1 percent tax is reduced for WHT, which will now be 14 percent
  • 1 percent tax is reduced for GST/FED, which will now be 18.5 percent.
  • These tax rates, if approved by the house, will be applicable from July 1st, 2014.

Taxes on Telecom Services Explained

After 1% reduction in withholding tax and 1% reduction in GST/FED, total taxes on telecom services will be 32.5 percent, down from 34.5 percent.

Following is the complete detail of taxes on Telecom services:

  • Withholding Tax: 14 Percent
  • FED/GST: 18.5 Percent
  • Total Taxes: 32.5 percent

Just to add to the misery, all cellular companies are charging around 12 percent services charges. After these charges, total money deducted from cellular services:

  • Taxes: 32.5 Percent
  • Service Charges: 8 Percent (for prepaid only)
  • Total Deduction: 40.5 percent

In simple words, Rs. 59.5 out of Rs. 100 will be be available for airtime usage.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK


  • @Admin please explain me that you also wrote “Government announced that it will withdraw FED on telecom services from those provinces that have imposed GST on telecom services” What’s this? and do we (Sindh) users get any relief from 19.5% tax, That’s imposed on us with the Broadband packages of Rs.1500 or more?

  • Special request to @aamir7:disqus : aamir Bhai mein post paid user hoon, humare bill pe 2 taxes hote hain, first SALES TAX (19.5%) or second ADVANCE TAX (15%). Muje pta chla hai k ye tax is tarha apply hota hai, For example:
    Bill before tax: 300
    Sales tax : 58.5 = 358.5
    or ab is total pe 15% withholding tax apply hoga to or is tarha total hoga: 358.5+54 = 412 rupess approx.
    Kya ye sahi information hai?
    Hope you will reply soon. Thanks

  • Special request to @aamir7:disqus : aamir Bhai mein post paid user hoon, humare bill pe 2 taxes hote hain, first SALES TAX (19.5%) or second ADVANCE TAX (15%). Muje pta chla hai k ye tax is tarha apply hota hai, For example:
    Bill before tax: 300
    Sales tax : 58.5 = 358.5
    or ab is total pe 15% withholding tax apply hoga to or is tarha total hoga: 358.5+54 = 412 rupess approx.
    Kya ye sahi information hai?
    Hope you will reply soon. Thanks

    • I need some time sir, to get back on this. I was myself considering to check this with someone. I will get back to you in a day.

      • Aik baat or btaye, ap bar bar kehte hain k Internet pe koe tax nai, lekin postpaid mein hum jab koe bandle subscribe karte hain to wo bill before tax mein add hota hai or phr total amount pe tax lagta hai, phr ye kaise sahi howa k Internet pe tax nai. Jawab ka intezar rahe ga

      • @danishiqbal543:disqus Bhai abhi tak @aamir7:disqus Bhai ne to reply nai kiya, lekin ap is ka reason to btaya, Tax pe Tax ki kia Tuk banti hai? or @aamir7:disqus Bhai se ye b pocha tha k internet pe koe tax nai ka matlab kya hai? humare bills mein to internet k bucket pe b tax lagta hai. umeed karta hoon ap jald reply karaiin gaye, shukria.

        • Dear there are 2 types of taxes, first one is withholding tax (15%) which is deducted/charged whether you use the air time or not, the second one is charged on usage (19.5%).
          in postpaid bills, withholding tax must be charged irrespective of the fact that the usage is exempt from 19.5% tax or not.
          Internet is exempt from 19.5% but not Withholding which was supposed to be deducted on recharge if you were prepaid customer.

      • Daikha hai, or helpline se pocha hai bus confirm karna tha k company sachi yaari to nai nibhaa rahi kaheen.

    • Your understanding is correct. This is because no advance tax is being deducted on postpaid as compared to prepaid. So once bill is generated, sales tax is added and then advance tax is applied on the entire amount

    • @ Hasnain….. Yes its correct, postpaid pai hamesha isi trah tex apply hota hai. Previously i was using warid postpaid and now mobilink, same on both atleast.

  • Lo g Pehle jab recharge karvain to deduction daikh k hosh ur jate hain..ab kiya ho ga:-P

  • how come they have reduce it to Rs 60 before i get Rs 75 out of 100. now what they done whats the 1% drama is…

  • how come they have reduce it to Rs 60 before i get Rs 75 out of 100. now what they done whats the 1% drama is…

  • The ‘Global Truth’ (“Governments lie.”) is the TRUEST, so far as the Governments under the PPP-Z and PML-N are concerned. It would be based on the undeniable facts and which definitely merit potrayal of naked reality in the forthcoming Hollywood movies entitled as (i) ‘The President who was a Thief’ and (ii) ‘the Prime Milnister who was a Top-Liar’, so the entire world would see and witness their real worth. 98% People of Pakistan take both of them as Anti-People or ‘AWAM-DUSHMAN’ merely because of their ‘Utterly Selfish Acts & Omissions.’ …… “Jo chupp rahegi, zabaan-e-khanjar, laahoo pukarega aasteeN ka!”

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