MoIT Proposes Relief Package for Telecom Sector in Form of Tax Rationalization

A relief package for the telecom sector, proposing major incentives in form of tax relaxation is on the cards, senior government officials confirmed to ProPakistani.

State Minister for Information Technology, Anusha Rehman, had constituted a three member committee seeking its input for evaluation and proposals for rationalization of taxes on telecom sector.

The committee was tasked to study the impact of taxes on telecom sector, revenues of telecom operators and user behavior after government increased taxes on telecom services. Consequently, the committee was also tasked to prepare a proposal with its recommendations for tax rationalization for the sector.

The committee was comprised of Chairman Pakistan Telecommunication Authority (PTA) Syed Ismail Shah, Member Telecom, IT Ministry, Mudassir Hussain and Member Legal, IT Ministry, Ms. Ameena Sohail.

After intense study and workout, the committee has finalized a report and has submitted it to the IT Ministry. The committee mainly studied the tax ratio during 2012-13 and made a comparison of the industry growth during that time as compared to growth during 2013 till 2015 when new taxes were imposed.

According to sources, IT Ministry will submit the report to Finance Ministry for formal approval and to seek relief for the telecom sector.

Telecom sector is on federal legislative list, however provincial taxes on telecom services (GST) seems to be interfering and are unjustifiable: Committee Report

The committee in its report pointed out that increased taxes are negatively impacting the sector. It has further pointed out that heavy taxes have badly affected the prospects of upcoming 3G/4G auction.

According to sources, the committee has recommended the rationalization of taxes for Telecom sector, but it is unclear that what tax ratio it has proposed to the government in its report.

Access to broadband services in the country was 3 percent before the launch of 3G/4G services, which is now around 15 percent. According to an international study, a country can reap the benefits of internet access towards economy once the access to services crosses the mark of 20 percent.

The committee raised the issue that federal government imposed 14% WTH on internet usage in July 2015 and then there were provincial governments charging up to 19.5% sales taxes on internet and other telecom services.

Committee said that internet uptake is at early stages and such massive taxes are curtailing the growth and they must be withdrawn immediately.

The committee further pointed out that telecom sector is on federal legislative list, however provincial taxes on telecom services (GST) seems to be interfering and are unjustifiable. The committee has reportedly recommended their withdrawal.

The three members committee has also reportedly proposed industry status for the industry. If the sector wins the industry status, its tax obligations in terms of customs duty, sales tax and income tax would significantly reduce.

The government approved a new telecommunication policy last month with the objective to improve the sector’s efficiency and service delivery but refused to give it the status of industry, which was desperately needed to get relief from heavy taxes.

While MoIT has done a good job in preparing the proposal, it is yet to be seen how Ministry of Finance is going to respond to such recommendations and if any relief in form of taxes will be granted to telecom sector at all or not.