PTA Proposes Tax Cuts to Increase Revenue from Telecom Sector

Pakistan Telecommunication Authority (PTA) has made several proposals to the government for increasing revenue from the telecom sector which will at the same time revolutionize the sector in the near future.

The Commercial Affairs Division of PTA has prepared a presentation, a copy of which is available with ProPakistani, shows the impediments in the telecom sector growth and also propose its remedies.

Here’s a point by point rundown of the issues being faced by the government and telecom sector and how the PTA is proposing to overcome them.

Withholding Tax

Current Tax Rate: 14%

  • Issue

Majority of the subscribers are non-tax filers due to income BTL, hence, cannot get adjustment in their annual tax returns. There are a total of 3.5 million NTN holders in Pakistan. Our active tax payer userbase is around 0.8 million. Only 0.6% of mobile subscribers could be actual tax payers, which is a staggeringly low amount. Since for rest of the economy, W.H.T is mostly charged @10%, tens of billions of rupees in advance income tax are not being claimed.

  • Remedy

Federal Board of Revenue (FBR) should either abolish/rationalize this tax or devise a mechanism to charge withholding tax from only those subscribers who are otherwise taxable and are liable to file a tax return.

General Sales Tax

Current Tax Rate: 18-19.5%

  • Issue

GST / FED is being charged @19.5% in Punjab, KPK and Balochistan, 18% in Sindh and 18.5% in rest of Pakistan) much higher as compared to average 16% GST on other sectors of economy.

This sort of uneven treatment, when telco sector has been one of the highest contributors in tax returns and has brought significant FDI, is making the relationship between the telecom operators and the government brittle.

  • Remedy

GST/FED on telecom services should be reduced to the average GST rates in other sectors.

Tax on Supply of SIM

Current Tax Rate: Rs. 250/new or replaced SIM

  • Issue

The re-introduction of SIM Activation Tax on the supply of a new or replaced SIM Tax @Rs 250 per SIM is burdensome. Specially since more than US$ 25 million has been invested in the Biometric Verification System (BVS) exercise in 2014-15 and US$ 1.2 billion was spent on acquiring 3G and 4G spectrum in the auction.

  • Remedy

The tax should be removed.

Industrial Undertaking’ Status

Current Status: Telecom sector not classified as ‘industry’

  • Issue

In the absence of the Industrial undertaking status, telecom operators are unable to adjust the income tax paid at the time of import which is treated as final tax liability.

  • Remedy

To classify telecom sector as “Industrial Undertaking” under clause (b) of section 2(29C) of the Income Tax Ordinance 2001

Increase in Custom Duty on Import

Current Rate: 5- 20%

  • Issue

Custom Duty on the import of telecom equipment has been increased from 0% – 5% in 2012-13 to the current level of 5%-15%, at a stage when operators are required to up-grade their infrastructure for the speedy roll out and adoption of mobile broadband services in Pakistan.

  • Remedy

FBR should revert the increase in custom duty.

Impact of Tax Proposals on FBR Revenue


  • I hope that through some good will (read : miracle) , the GOP finally decides that the taxes really are irrational and abolish or atleast rationalize them to a fair level.

  • No it can’t do anything. They have to feed their kids and buy property in UAE and England.

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