ISLAMABAD: The Finance Ministry has declared the telecom sector as one of the highest tax paying sectors in terms of withholding taxes.
In Finance Act 2015-16, the government increased sales tax on import of different varieties of mobile phones by 100 percent. The sales tax applicable on various categories of imported mobile phones is increased from Rs 150, Rs 250 and Rs 500 to Rs 300, Rs 500 and Rs 1,000, respectively. Regulatory duty imposed on the import of mobile phones will be withdrawn once new rates are implemented.
In a written reply, the Finance Ministry told the National Assembly on Wednesday that withholding income tax deducted from consumers is adjustable at the time of filing of their returns.
Rates of various taxes charged from consumers include 14% withholding income tax on the amount of bill or sale price of internet prepaid card or prepaid telephone card or sale of units through any electronic medium or whatever form and 18.5% federal excise duty on telecom services (Islamabad territory).
The Finance Ministry further said that it was not correct that double tax was being collected and charged by the cellular mobile companies from the consumers.
There are actually two different types of taxes being collected from the consumers under different tax statutes, one is advance income tax under Income Tax Ordinance, 2001 and other is sales tax/FED charged at the time of making calls. Advance income tax is adjustable against income tax liability of the consumer and in case of no tax liability, the tax deducted is refunded.
When contacted, a well-placed source at Federal Board of Revenue (FBR) told Customs Today that FBR collected Rs 43 billion on account of withholding tax during 2014-15. Only 0.9 million out of 120 million total users deposited tax return claims and got back what they paid in advance. The remaining amount of more than Rs 40 billion was automatically confiscated by the government at the end of the financial year.
The source said that the telecom companies and thousands of franchisers were charging the 14% advance tax from consumers on every recharge but neither FBR nor PTA had human or technological expertise to check whether the huge advance tax collected from users was actually deposited in national exchequer or not.
The source added that majority of the mobile phone subscribers in Pakistan did not claim the tax return that was deducted in the form of withholding tax. Therefore, it is need that the FBR must create awareness among people for claiming their tax return, which will not only be helpful for the public but also for the government to enhance tax base by registering more people.
