The Federal Board of Revenue (FBR) has attached the bank accounts of the government-owned Universal Service Fund (USF) after raising a disputed demand of Rs. 23.23 billion in withholding tax.
The action has halted all payments for ongoing telecom expansion projects in rural areas of Pakistan.
According to officials, the Deputy Commissioner Inland Revenue (Audit) issued assessment orders covering tax years 2015 to 2023, raising an aggregate demand of Rs. 23.23 billion. The demand is based on the disallowance of USF project subsidy expenses, citing alleged non-compliance with withholding tax provisions.
However, USF maintains that subsidy payments are exempt from withholding tax. It further argues that telecom operators awarded these subsidies through competitive bidding processes have already complied with withholding tax requirements at the time of expenditure from these funds.
USF is a state-run entity established to finance telecom infrastructure in unserved and underserved regions where commercial rollout is not viable for private operators.
The fund is financed through mandatory contributions of 1.5% of annual gross revenues collected from all licensed telecom operators.
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