FBR Advised to Grant Industrial Status to the Telecom Sector

The Federal Board of Revenue (FBR) has been recommended by the Overseas Investors Chamber of Commerce and Industry (OICCI) to provide industrial prominence to the telecom sector with elimination of SIM taxes, sales tax on import of the handsets and IMEI tax, decrease in advance tax rate to 5% and FED rate be associated with other services at 16% in budget (2016-17). OICCI has acquiesced numerous suggestions to FBR regarding telecom sector.

FBR Advised to Grant Industrial Status to the Telecom Sector

The tax remunerated at the time of import of telecom equipment at 5.5% is deliberated as final tax interpreting it is un-adjustable against final tax accountability. Federal Finance Minister has approved in words with all the mobile operators concerning allowance of industry status in his several meetings. Ministry of IT and Ministry of Industries both have approved the status of industry to mobile operators still FBR has not granted the status of industrial undertaking to Cellular Mobile operators.

Telecom companies should be professed as industrial responsibility as the telecom companies are not marketable retailers and telecom equipment imported is used in the network to deliver telecom facilities instead of further sale. Fixed tax on import of telecom equipment surges the price of network, an extra hurdle to mobile network coverage in Pakistan.

There are numerous taxes on SIMs and phones in the form of sales tax on import of local supply, sales tax on supply of SIMs and IMEI tax. In Finance Act 2014, FBR has levied sales tax at Rs 250 per SIM card on supply of SIM cards. Also FBR has imposed sales tax on import of native supply and IMEI tax on handsets. The imposition of various taxes on SIMs and handsets directly limit the investment in telecom sector. Particularly after auction of 3G license substantial taxation is confining the investment in infrastructure.

Telecom industry is one of the greatly taxed industries in Pakistan. In Pakistan taxes on telecom industry represent more than 30% of the total cost of mobile ownership, pointedly above the regional average.

At present, various taxes are applied on telecom users consisting, 18.5% FED on telecom customers and 14% advance tax on depletion of telecom services. OICCI has suggested that FED rate should be aligned with other services at 16% whereas advance tax rate should be abridged to 5%. By plummeting taxes on mobile sector, the Pakistani government cannot just proliferate digital and financial inclusion and economic growth, but also recuperate greater tax profits through more competent and broad-based taxation.