Tax on mobile cards is considered easy money for the government in meeting its annual revenue targets. Ever since the Supreme court of Pakistan forbade government and telecom companies from deducting taxes on Rs. 100 mobile phone card, the revenue shortfall is rising.
But the government has confirmed it is not going to implement the tax on mobile phone credit in Pakistan in this fiscal year.
State Minister for Revenue, Hammad Azhar, said the government wasn’t planning any additional revenue measure; however, there is a plan to come up with another formula to revise taxes on telecom services since the Supreme Court of Pakistan had rejected the earlier method of FBR.
In May 2018, then Chief Justice of Pakistan, Mian Saqib Nisar had taken suo moto notice on the deduction of 40% tax on mobile cards, especially of Rs. 100 denomination. He questioned why the government was putting the burden of taxes on those who did not fall in the tax bracket. In the following month, the apex court suspended the tax collection on Rs. 100 mobile card and directed the financial regulator and the telecom companies to come up with a viable option to implement taxes on the mobile cards.
Hammad further explained that suspension of tax on mobile cards and slashing of the sales tax rate on petroleum products had widened the revenue shortfall for the government.
From mobile cards alone, the annual revenue collection for the government goes beyond Rs. 50 billion mark.
Before the suo moto action, there were numerous taxes on a mobile phone card in Pakistan. On a Rs. 100 balance, a user was subjected to 19.5% federal excise duty, 12.5% withholding tax, and 10% service charges. The final balance that was credited after the tax deduction hovered around Rs. 66.5.