Finance Bill 2021-2022: Bill proposes tax rate hike for Telecom Sector

In proposed finance bill 2021-2022, the government has imposed taxing measures to raise Rs343 billion as a prerequisite for the reinstatement of the International Monetary Fund’s $6 billion External Fund Facility (EFF).

The measures include removing GST exemptions on over 150 products, increasing the advance Withholding Tax on cellular services and tripling the advance tax on car registration.

Rate rises for sales tax and withholding tax (WHT) imposed on the IT and telecommunications sector are included in the proposed finance bill 2021-2022. The government proposed the raise of 15% from 10% in WHT in the bill, while restoring the 17 percent sales tax on computer and IT equipment imports.

The sales tax on high-end phones (those costing more than $200) ranges from Rs1,750 to Rs9,270 per set. Mobile phones worth more than $200 that are imported in CBU condition are subject to a 17 percent sales tax.

The Sales Tax Act’s Third Schedule (printed retail price); Fifth Schedule (sales tax zero-rating); Sixth Schedule (exemption); and Ninth Schedule (mobile phones) have all been amended by the Finance (Supplementary) Bill 2021.

How much tax mobile phone consumer will pay?

They would have to pay Rs3.9 extra on every Rs100 recharge after the mini-budget is approved. After tax reductions, consumers will get an available balance of Rs76.10 on a Rs100 recharge. Following the rise in the advance tax rate, the available amount would be decreased to Rs72.20.

Govt. is considering revisiting the measures proposed in the finance bill 2021-2022

Not only have the five telecom corporations stated their displeasure with the proposal, but even Minister of Information Technology and Telecommunications Syed Aminul Haq is opposed to the proposed measures.

According to ministry sources, the IT minister has expressed the stakeholders’ dissatisfaction to Prime Minister Imran Khan. “The IT minister informed the prime minister that raising taxes on the telecom sector would hinder growth and investment,” according to sources.

RELATED: PTA launches mobile app to facilitate telecom consumers

It’s worth noting that the government had previously suggested lowering the WHT to 8% by 2023 as part of its Digital Pakistan initiative. However, it now appears that short-term economic goals have taken precedence over the vision. This move might backfire on the government’s revenue goals if it prevents the industry from meeting its revenue expectations.

The World Bank stated earlier this week in its “Telecommunications Advisory Assistance, 5G Readiness Plan for Pakistan” that the government must maintain a consistent policy position and minimize taxation on the industry to expedite the project of 5G in Pakistan.

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Nayab Khan

Nayab Khan is a freelance tech-writer whose specialty is absorbing the key data and articulating the most important points. She helps IT based organizations communicate their message clearly across multiple channels.

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