Telecom companies and cell phone sellers have always felt the pain due to burgeoning taxes and duties that has always negatively impacted the growth of the sectors, but this year there seems a little relief for everyone.
Reduction of tax on mobile phone call
While presenting the annual budget 2017-18, Finance Minister Ishaq Dar announced the reduction of withholding tax on a mobile phone call that every telecom consumer pays in advance to the government. The withholding has been reduced from 14% to 12.5%. From the next financial year, all the 140 million mobile subscribers will pay 1.5% lesser WHT on each phone call.
Only last year, the government of Pakistan had accumulated Rs. 48 billion with the help of 14% WHT on mobile phone calls.
FED on telecom services
Federal Excise Duty (FED) on telecom services has also been decreased to 17% which was 18.5% earlier. Dar hoped that provincial governments would also follow the initiatives of the federal government in their respective budgets of 2017-18
End of tax on mobile banking transaction
There is another relief for the branchless banking sector. As announced in the budget speech, Withholding tax on the transactions of branchless banking has been abolished. There will be no tax on any transaction of Easypaisa, Jazzcash or similar financial services.
Telecom industry has shown a mixed reaction to the budgetary announcement. An official of a leading telecom operator said, “It is indeed a positive development, and it will benefit the sector.”
However, a senior official of another telco demanded more who stated, “1.5% reduction of tax on a mobile phone call is below expectations. It should have been reduced to 10% which was the percentage before PML-N government came into power”.
Customs duty reduction on mobile phone import, A Deception
In order to promote the usage of the smartphone in the country with the help of low-priced gadgets, the government has apparently announced a relief only for the budget smartphones. In budget 2017-18, customs duty on low priced Android phones has been reduced from Rs. 1,000 to Rs. 650.
Update: (May 27, 2017)
The relief was very deceptive since the Finance Minister did not disclose the actual measures he had proposed. MORE News found out that government had actually doubled the duty and taxes and budget speech was mere an eye wash. Find out our findings on the real taxation. The handset industry has decided to raise the voice.
Tax exemption for IT companies
In order to encourage people, especially the youth to indulge more into information technology, in the budget 2017-18, the government has exempted IT companies from the income tax. Any IT company that will be established from now on will be exempted from income tax for first 3 years.
IT companies can open and operate foreign exchange accounts in Pakistan if they could show their income as foreign remittances in these accounts. These accounts will be used for their foreign payment.