PESHAWAR: The Pakistan Telecommunication Authority (PTA) has decided to raise the matter of 19.5 percent provincial sales tax on mobile internet and data services with all the four provinces, including Khyber Pakhtunkhwa as the move is not only hurting telecom sector but also making the facility dearer for the consumers.
Sources said that the Authority conducted a study according to which the provincial tax is hurting the business of telecom operators at a time when the government is moving forward for the remaining 3G/4G spectrum auction, official sources revealed to Customs Today.
The PTA will approach the Revenue authorities/Boards of all the provincial governments urging them to withdraw sales tax on internet, senior officials confirmed. The telecom sectors have shown serious concerns and one of them have already obtained a stay order against the levy from the Lahore High Court (LHC). After the introduction of tax, internet users are paying 33.5 percent sales tax/withholding tax from July 1, 2015 and making the internet facility unaffordable for some customers, especially for students, who use it for their research work, the officials added.
The government of Punjab has announced the reversal of sales tax on data services, while the government of Sindh has reduced the sales tax on telecommunication and data services to 18 percent from 19.5 percent. Though the imposition of sales taxes is the jurisdiction of provincial governments, however the Authority has decided to address telecom sector’s concerns, sources added. Through Finance Act, 2015 internet bills of a subscriber and prepaid cards have been subjected to withholding tax. The person preparing internet bills/issuing or selling prepaid internet cards shall charge adjustable advance income tax @14 percent of the amount of internet bill or sale price of internet prepaid cards. At the same time 19.5 percent sales tax on internet services was imposed by all the provincial governments. Punjab government announced the withdrawal of the mobile internet taxes on floor of House in budget speech on June 12.
Despite an announcement by Shahbaz Sharif, Chief Minister of Punjab, and Punjab Finance Minister that the tax on internet will be withdrawn the government has not yet issued the notification for reversal of 19.5 percent internet sales taxes that the province imposed, said the official. Revenue authorities seemed to be resisting withdrawal of tax of 19.5 percent on mobile internet data services – a proposal designed to generate billions of rupees in taxes through telecom industry.
The cellular sector of Pakistan is already among the most heavily taxed sectors in the world as mentioned in a recent GSMA study which is an impediment for its growth. World Bank studies indicate that 10 percent increase in high-speed internet connections boosts annual Gross Domestic Product (GDP) growth by 1.38 percent.
According to the latest International Telecommunication Union (ITU) report, “the state of broadband 2015” Pakistan ranks at 151 among 190 countries in terms of internet usage. India ranks at 90, Sri Lanka at 122, Bangladesh 162, Maldives 83, Afghanistan 170 and Bhutan 67. The data shows that a large number of the population has access to internet in Pakistan; however a huge burden of taxes may discourage the use of intent, official added.
