Finance Minister Shaukat Tarin on Wednesday informed the National Assembly that advance tax is levied on sale price of prepaid telephone cards, including prepaid mobile phone cards under the provisions of clause (b) of sub-section (1) of section 236 of the Income Tax Ordinance 2001.
The rate of deduction of this advance tax is 10 percent of the sale price of said cards as provided in Division-V of Part-IV of First Schedule to the Income Tax Ordinance, 2001. In a written reply to the House, Tarin said telecommunication services are chargeable to Federal Excise Duty in Value Added Tax (VAT) mode @ 19.5 percent of the charges.
However, there is no sales tax on such services. To another question, Tarin said sales tax exemptions are provided in Sixth Schedule to the Sales Tax Act, 1990. However, section 13 of the Sales Tax Act, 1990 empowers the federal government and the Federal Board of Revenue to exempt any taxable supplies or import of any goods or class of goods from the whole or any part of the chargeable tax.
In exercise of these powers, the Federal Board of Revenue has granted various special exemptions during the last five years. Generally, special exemptions are granted by recording the justification in each case to NGOs, research institutions, law enforcement agencies, Prime Minister/President Secretariat, sports federations, charitable/welfare organisations such as Edhi Foundation, on goods which are donated by donors or friendly countries.
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