The Supreme Court is removing additional charges on postpaid subscriptions, that are being paid to cellular companies in Pakistan.
Current taxes charged on postpaid subscriptions include a withholding tax of 12.5% and General Sales Tax (GST) at either 17.5% or 18.5%.
Unjustified Service Charges
During a hearing, Chief Justice Pakistan discussed cellular service rates and the amount of tax paid on each subscription payment, saying that the incremental costs (Rs. 25 on a Rs. 100 recharge) paid on each recharge don’t exactly go to the FBR.
They are deducted as “service charges”, which according to the Chief Justice says are “not justified”. As for taxation, the government already receives tax when you make a call, so there’s no need for an additional deduction when paying for a balance recharge, responded an FBR lawyer.
Finally, the Supreme Court ordered the FBR to come up with a way to rightfully tax mobile users, so that only the people who are eligible to pay tax have to bear additional charges. Until the FBR comes up with something feasible, the postpaid taxes are likely to remain abolished.
Back in June, the Supreme Court removed taxes and administrative charges of mobile phone companies on prepaid users.
The Apex had asked the FBR earlier to find a way to tax mobile phone customers in a manner so that only those under the tax net have to pay the taxes.
Until such a method is developed, mobile taxes are likely to be suspended.
With the suspension of withholding taxes on prepaid services, the federal govt is losing around Rs. 120 million per day. The provincial governments are losing Rs. 160 million (combined) because of the suspension of GST on mobile services.
Removal of tax charged from postpaid consumers will further increase lost tax revenue.
This is a developing story, we’ll update it as more information becomes available.