The Ministry for Finance and Revenue of Pakistan has stated that the telecom services in the country are a high-profit margin service compared to other services, hence, they are subjected to higher taxes.
The ministry stated this while replying to a question asked in the National Assembly concerning the withholding tax on telecom services being significantly higher compared to some of Pakistan’s other sectors.
The Finance Ministry also informed that Income Tax is collected under section 236 of the Income Tax Ordinance, 2001, by telecom corporations on mobile phone services at the rate of 10 percent with effect from 01-07-2021 of the gross amount of bill.
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Furthermore, FBR collected nearly Rs. 54 Billion under section 236 of the Ordinance during the tax year 2020. This advance tax is supported by consumers and not by the telecom operators. Moreover, the Honorable Supreme Court of Pakistan has likewise upheld this tax collection.
Finance Ministry further asserted that subscribers of cellular phones companies (CMOs) are charged to Federal Excise Duty in sales tax form in the Islamabad Capital Territory (Tax on Services) Ordinance, 2021, only.
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While sales tax on the telecom division in provinces is managed by Provincial Revenue Authorities as per the charges prescribed below their particular sales tax on services rules. FED in Federal capital is collected as per S. No. 6 of Table-II of the First Schedule to the Federal Excise Act, 2005 which has now been decreased to 16 percent from 17 percent, as stated in the Finance Act, 2021.
In addition to this, according to the Finance Act, 2021, FED on mobile calls exceeding five minutes has been charged at paisa 75 per call. In response to this, the Finance Ministry declared that under the Income Tax Ordinance, 2001, tax obtained on Telecom Service can be adjusted on the filing of return by the taxpayer. The ministry said that even if the income is Below Taxable Limit (BTL), the amount can be returned to the taxpayers on the filing of the return.
Source: Pro Pakistani