Budget proposals 2014-2015: 16 percent GST for mobile telecommunication industry advocated

KARACHI: The business community has advocated the government to reduce general sales tax (GST) of heavily taxed mobile telecommunication industry to 16 percent from current rate of 19.5 percent.
Another suggestion for upcoming budget 2014-2015 is to decrease withholding tax for subscribers to five percent from existing rate of 15 percent.
However, the business community also recommended that activation tax of Rs 250 on every new subscriber identity module (SIM) card (new connection) should be abolished and hand set tax of Rs 500 to Rs 1000 (depending on type of handset) should be eliminated.
It said that in Pakistan overall mobile telecommunication industry are levying with heavy taxes of 40 percent, which is one of the highest tax rates in the world.
The business community said that specific taxation has become burden for both operators and consumers which is halting growth of the sector.
It is increasing the country’s risk profile and undermining the rationale of further investments for the industry.
It is believed that high taxation limits the significant impact that mobile technology can have on the poorest in society and restricts economic development. However, it could be achieved for the benefit of all and ultimately governments lose out the benefits of growth as well, which would have outweighed the short-term benefits of tax receipts.
The business community has also suggested the tax machinery to exempt registered companies from sales tax/federal excise duty (FED) those who are registered under Sales Tax Act.
The Federal Board of Revenue (FBR) should categorize registered and unregistered status for five percent additional tax.
It said that it will not affect the revenue collection since this amount will be paid through monthly sales tax return.
However, sales tax and FED is charged on utilities provided by utility companies and additional sales tax at five percent in addition to 17 percent is imposed on commercial connection.
For this additional tax, exemption is only granted to those whose addresses are incorporated under specific national tax number (NTN). FBR is of the view that we should register ourselves for all the cell sites which is practically impossible.
Moreover, it is recommended that issuance of invoice for prepaid customers should be waived off because it is considered extra ordinary volume of such transactions.
It said that the issuance of invoice against every supply is a hardship issue for telecom industry, particularly to the prepaid customers.
The business community said that such change in FED Act, 2005 would lessen unnecessary procedural burden and would be taxed neutral.

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