Telecom sector to remain heavy tax payer
STAFF REPORT KHI: Telecommunications is amongst the most heavily-taxed sectors in Pakistan. The telecom operators have long been lobbying the government for a reduction in the GST rate of 19.5 per cent, which is collected in FED mode. The federal budget for next fiscal year did offer tax relief to a number of sectors and industries, but the telecom subscribers seem to be left out again for any respite.
According to a market expert, the telecom subscribers lose nearly a third of their pre-paid account balances owing to excessive taxation and all kinds of operator charges. The government levies a GST (FED) of 19.5 percent on service usage and deducts upfront a 10 percent WHT on account reloads. Cellular operators deduct additional service charges (5 percent and more) on reloads, besides charging operational/admin fees (1 percent and more).
When the Finance Minister was announcing a standard GST rate of 16 percent in his budget speech, the watching telecom professionals and informed subscribers must have jumped off their seats, thinking that the discriminatory taxation regime in the sector had finally been done away with – a boon for both the operators and their customers.
The Finance Bill indeed specifies that multiple GST rates of 22 percent and 19.5 percent would make way for a standard GST rate of 16 percent.