The Supreme Court, a few days back, suspended all sorts of taxes including services charges on mobile cards. The decision was welcomed and appreciated by the general consumer, however, it doesn’t bring good news for the national exchequer.
According to reports, the tax exemptions will result in a combined yearly loss of Rs. 123 billion to federal and provincial governments.
The provincial governments will share Rs. 75 billion of the total loss while the remaining Rs. 48 billion will be borne by the federal government.
The FBR, at the federal level, will see a monthly loss of Rs. 4 billion at the current 12.5% tax rate. The amount will total to Rs. 48 billion in the next 12 months as the tax exemption takes effect.
The tax regulator was collecting 19.5% tax at the provincial level on mobile cards, totaling to Rs. 75 billion annually. This tax will be dropped as well resulting in the loss of the said figure. For now, the exemption will be effective for at least 15 days starting June 13. Supreme Court has ordered FBR to develop a plan to exempt untaxable individuals from the taxes.
In case the tax waiver goes effective for the whole year, the FBR will see a revenue loss of Rs. 123 billion.
The Board’s Response
The FBR submitted its stance on the taxes to the Supreme Court in an attempt to justify the taxes. Explaining about the imposition of taxes, FBR told that the court that Supreme Court’s bench validated the income tax back in 2003.
About the Withholding Tax (WHT) on mobile phone cards, the board added that this is an adjustable tax which the filers claim while filing returns.
The response further added that the WHT was previously charged at 14.5% which was brought down to 12.5%. It was scheduled to be further lowered in the coming days, FBR added. However, the court was having none of it and decided to exempt all taxes on Rs. 100 cards.
Lastly, the FBR requested the court to constitute a larger bench in case it takes up the issue again. Currently, a three-member bench is hearing the case in the apex court.