The Federal Board of Revenue (FBR) has been urged to abolish the withholding tax rate at 12 percent on telecom services to promote the accessibility of internet/data services to the low-income group.
Similarly, Federal Excise Duty (FED) is charged at 17 percent on telecom services which is on the higher side as compared to other sectors, and general rate. Provincial authorities levy a much lower rate of sales tax on other services. Since sales tax is a consumption tax (on usage), the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.
There should be a single sales tax rate across all jurisdictions to remove the anomalies and undue hardships being faced by the telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business.
These recommendations have been sent by the Overseas Investors Chamber of Commerce and Industry (OICCI) to the Federal Board of Revenue (FBR) for the budget 2021-22.
The OICCI further recommended that since the insertion of 9th Schedule in Sales Tax Act, 1990 effective 1st July 2014, the matter is in litigation. This tax should be abolished, ab initio, by accepting the decision of Lahore High Court as the resolution of the matter will result in additional upside on the corporate tax side for the exchequer and eliminate the undue litigation.
On the issue of advance tax on auction/ renewal of telecom licenses at 10 percent under section 236A of Income Tax Ordinance, 2001, the OICCI recommended that this tax should be abolished being irrational and burdensome on CMOs keeping in view the financial/ tax position.
The chamber said that as large utility providers, cellular mobile operators (CMO) are subject to deduction/ collection of withholding of income tax on large numbers of transactions, which increases the cost and complexity of tax compliance and an additional administrative burden for the telecom sector and negatively impacts the overall business environment.
