Supreme Court of Pakistan has asked Federal and Provincial governments why and under what law telecom services are charged so heavily.
A four-member bench heard the case and included Chief Justice Mian Saqib Nisar.
Aside from issuing a notice to the mobile service companies, the provincial governments, and the federal government, the apex court has demanded a reply within a week.
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The Supreme Court of Pakistan has asked the federal government to explain why 140 million customers are charged with 12.5 percent withholding tax, particularly when only less than one percent of subscribers can refund this tax.
During the hearing, Chief Justice Saqib Nisar said that the law governing withholding tax seems imperfect and these taxes are exploiting customers.
One of the members of the bench, Justice Ejaz ul Ahsan, mentioned that 42% of the recharged amount is deducted as a tax before making a call. The Finance Minister was also summoned and was asked why roughly 140 million Pakistanis were paying so much in taxes.
Justice Ejaz also said that it was an illegal way to collect money and demanded that taxes on prepaid cards should be compared with rates in other countries.
17% sales tax is collected from federal regions and 19% is collected from the provinces, said the lawyer present in the court.
Chief Justice Nisar also mentioned taxes imposed on the sale of diesel in the country, saying that action would be taken against it as well.
Furthermore, the apex court asked provinces to submit their response on the 19.5 percent tax.
It also asked the cellular companies about the roughly 10 percent service charges deducted on mobile cards.
Attorney General of Pakistan was assisting the court and he clarified that the initial deduction on the card is 12.5 percent under the head of WTH.
Then there is a 10% service charge imposed by telecom operators, the Attorney General told the court.
When the court asked why this charge was deducted, Attorney General said that telcos themselves can submit the best response on it.
The next hearing will be held next week.
Background
This all started when the Chief Justice took notice of the high amount of taxes charged on prepaid phone cards in Pakistan, back on May 3rd.
He asked why the companies were charging so much and under which tax categories. In this regard, the Supreme Court issued notices to all telcos and also summoned the Attorney General of Pakistan.
According to reports, if you recharge an Rs. 100 prepaid card, you will be charged 19.5% Federal Excise Duty (FED), 12.5% withholding tax (WHT) and 10% service/maintenance charges. All of these add up to 42% in taxes.
There are, at present (PTA statistics collected in January 2018), 144 million mobile phone users in Pakistan.
Telcos’ Aligned with Demand for Rationalized Taxes
Mobile phone companies have asked time and again for the rationalization of taxes on telecom sector. Government, however, has always put deaf ears on such demands.
Pakistan’s mobile phone companies have invested over USD15 billion since deregulation in 2003 and are credited for creating 14,000 direct and hundreds of thousands of indirect jobs.
Telecom companies think that in a market with extremely low customer revenues and high investment in infrastructure, there is a need for greater proliferation of services for the country to fully realize the benefits of information communication technology.
It’s not a secret that higher penetration of digital technologies is possible only through affordable services, and government has done exactly the opposite by taxing telecom services with such high rates.
On industry’s part, to ensure cheap access and higher penetration of telecom services, the sector is continually bringing more and more value to the consumers, which is evident from 90% reduction in data price, 30% in voice and over 50% reduction in SMS prices in comparison with 2013.
Mobile Operators said that ehy share the concerns of the Honourable Supreme Court regarding affordability of telecom services and are directly aligned with The Honourable Court’s observation of irrational taxes which are an impediment towards developing digital ecosystem, increasing internet penetration and bridging the digital divide.
In Pakistan, with our flawed systems amd crook and incompetent govt machinery, never expect to have anything refunded back from FBR. I am filer since 2010, tax is deducted at source, yet pay all sort of taxes only non filers should be paying. Mobile, internet, cable TV and blah blah. All on promise that those will all be refunded by FBR if you are a filer. Hah, does that ever happen. Morons have taxed even internet.
getting some thing from FBR is a dream that would never come true…. Cellular companies never share the tax certificate, and even if they do it is shared after the closure of financial year.
You can get the tax certificate for each month or for the whole year, its not true that companies do not provide it.. Now you have so many options as well. You can get it through a phone call on your email address, visiting there Business Centers, through there Mobile apps etc… you just need to know how to get what you required.
Let’s see, what Chief Justice notice, at least He notice how these white collar robbers are stealing from the nation with both hands.
I believe the white collar robbers you mentioned are not the mobile companies. Please check what rate of taxes being charged to cellular companies and what are the charges a company have to bear to run a site where user is waiting to put on a SIM when any SIM Lagao offer is launched :). No offenses but cellular companies are the chicks who are giving golden eggs and government imposing all sort of taxes as they know that it is now a basic need of a user…
i don’t know why people are so much fools, kept on calling on the basis of fake messages and fake posts that now telecom companies are not charging the taxes. taxes are imposed by the govt and being paid to them. If any changes will be made, it will be a Breaking News in media and papers. NOT POSTED ON ANY STUPID FACEBOOK WALL or through SPAM SMS. Have some patience… Our govt. is not that good to let go a huge amount which they get in terms of Taxes.
PS: Are you sincere with the taxes if government don’t deduct it by themselves?
Can someone give me reference of federal duty 19.5% and withholding tax of 12.5% from Income Tax Ordinance? I believe this 10% maintenance charges will network provider’s own?