Pakistan Telecommunication Authority (PTA) has decided to put up the issue of 19.5% provincial sales tax on mobile internet and data services with all the four provinces. The Authority has conducted a study that revealed that the provincial tax is affecting the business of telecom operators at a time when the government is advancing towards the auction of the remaining 3G/4G spectrum.
A senior official confirmed that PTA will approach the Revenue authorities of all the provincial governments advising them to withdraw sales tax on internet. The telecom sectors have shown serious concerns on this issue and one of them have already acquired a stay order against the tax from the Lahore High Court (LHC). The official further added that after the implementation of tax, it has become difficult for some customers, especially for students , who need internet for research work and are not able to pay such huge amount of taxes. Internet users are paying 33.5% sales tax and withholding tax from July 1, 2015.
PTA to Raise the Matter of 19.5 percent Sales Tax with Provinces
The government of Sindh has abridged the sales tax on telecommunication and data services to 18% from 19.5%, whereas the government of Punjab has also proclaimed the reversal of sales tax on data services. Punjab government had announced the withdrawal of the mobile internet taxes in budget speech on June 12. Although the imposition of sales taxes is the power of provincial governments, however the Authority has decided to address telecom sector’s concerns. With Finance Act, 2015 internet bills of a user and prepaid cards have been subjected to withholding tax. The person making internet bills or selling prepaid internet cards shall charge adjustable advance income tax @14% of the amount of internet bill or sale price of internet prepaid cards. At the same time 19.5% sales tax on internet services was implemented by all the provincial governments.
An official said that regardless of the announcement by Shahbaz Sharif, Chief Minister of Punjab, and Punjab Finance Minister that the tax on internet will be removed, the government has not yet issued any notification for reversal of 19.5% internet sales taxes that the province had levied. Revenue authorities seemed to be repelling withdrawal of tax of 19.5% on mobile internet data services a proposal designed to generate billions of rupees in taxes through telecom industry.
In a recent study by GSMA Pakistan’s cellular sector is already among the most greatly taxed sectors in the world. World Bank studies shows that 10% increase in high-speed internet connections lifts annual Gross Domestic Product (GDP) growth by 1.38%. According to the recent International Telecommunication Union (ITU) report, “the state of broadband 2015” Pakistan ranks at 151 among 190 countries in terms of internet usage. India ranks at 90, Sri Lanka at 122, Bangladesh 162, Maldives 83, Afghanistan 170 and Bhutan 67. The data reveals that a large number of the population has access to internet in Pakistan, but huge amount of taxes may badly affect the extent of people using internet.