News Analysis |
The Supreme Court of Pakistan has suspended unlawful tax collection on mobile cards today on June 11th, 2018.
Earlier in May, Chief justice of Pakistan (CJP) Mian Saqib Nisar had taken notice of the high levy charged on mobile phone cards in the country as he asked under which law Rs40 were being deducted from Rs100 mobile cards.
The FBR, via an illustration, had earlier explained to the SC that every time a consumer loads a Rs100 mobile card, 12.5pc of the total amount gets deducted as adjustable withholding tax, while 10pc of the whole goes to the telecom company as service charges.
A three-member bench of the SC heard the Suo Motu case at the Lahore Registry. The CJ observed that there should be a difference between those who pay their taxes and those that don’t.
Justice Ijaz Ul Ahsan questioned Chairman Federal Board of Revenue, whether a person who does not fall under the tax net can be charged?
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The court, when it was told earlier that for every cellular charge, 5.5 per cent was deducted as a withholding tax, 19pc as sales tax and another 10pc as services charges, had described the deductions as exploitative and illegal.
The court observed today that ordinary cell phone users were “being looted” due to the taxation measures in place on prepaid cards.
“How can you ask a pushcart vendor to pay taxes?” Justice Ahsan asked. “If someone doesn’t fall into the tax net, how can taxes be imposed on them? It is unlawful that on a Rs100 prepaid card, only Rs64.38 is acquired,” Justice Ahsan said.
The chief justice said that only people whose cell phone usage crosses certain limits should be taxed.
The CJ observed that there should be a difference between those who pay their taxes and those that don’t.
According to statistics revealed by the Pakistan Telecommunication Authority in January this year, the number of mobile phone users stands at 144 million as compared to 142.5 million in October 2017.
The FBR, via an illustration, had earlier explained to the SC that every time a consumer loads a Rs100 mobile card, 12.5pc of the total amount gets deducted as adjustable withholding tax, while 10pc of the whole goes to the telecom company as service charges.
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With the telecom company taking its cut, the 19.5pc sales tax also kicks in. However, it is applied only to the telecom company’s 10pc rather than the entire Rs100 card. At this point, the consumer is left with Rs76.94, of which the government charges 19.5pc sales tax (Rs 15) to the consumer for making calls and sending SMS. In the end, as per the FBR calculation, the net amount left with the consumer for his actual consumption on a Rs100 charge is Rs61.93
In May 2017, the FBR had considered expanding the scope of 0.4% tax on banking transactions conducted by non-filers of tax returns to mobile banking services in the budget amid an outcry from telecom operators against heavy taxes eating up over one-third of revenue