Internet Bandwidth Becomes Expensive as FED Withdrawn: Budget 2019-20

The government has proposed the withdrawal of exemption of Federal Excise Duty (FED) on internet services and foreign satellite bandwidth service in the Finance Bill 2019-20.

According to the budgetary documents, the government has proposed the withdrawal of exemption of FED on internet services and foreign satellite bandwidth service. Telecom services provided in Islamabad Capital Territory are subject to FED under the Federal Excise Act, 2005. However, internet services are presently exempt from payment of FED under Third Schedule to the Federal Excise Act, 2005.

Internet Bandwidth Becomes Expensive as FED Withdrawn: Budget 2019-20

Further, bandwidth services are also exempted from payment of FED. In order to protect local services providers, it is proposed to withdraw exemption on services provided by foreign satellites and maintain exemption only on terrestrial bandwidth services.

 The government has proposed the withdrawal of 3% Value Addition Tax on Mobile Phones. It is proposed to exclude mobile cellular phones and satellite phones from the purview of 3% value addition. This 3% regime is also proposed to be transferred from the Sales Tax Special Procedures Rules, 2007, to the new Twelfth Schedule to the Act.

Further to incentivize local industry, the government has proposed rationalization of tariff structure for SIM card manufacturing industry.

 According to the Finance Bill, 2019 rate of levy on mobile handsets reduced as no levy imposed on imported phones valued under $100, Rs. 400 levy proposed on imported mobile phones worth $100 to $200 (which is currently Rs 500), Rs. 1,200 levy proposed on imported mobile phones worth $200 to $350 (which is currently Rs 1500), Rs.2800 levy proposed on imported mobile phones worth $350 to $500 (currently is Rs 3500) and Rs. 5600 levy proposed on imported mobile phones worth above $500 (which is currently Rs 7000).

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