A leading mobile phone company has conveyed to the Federal Board of Revenue (FBR) that imposition of 17 percent provincial sales tax on telecommunication services by Punjab and Khyber Pukhtunkhwa would result in extraordinary burden on the cellular companies, as FBR is already charging 19.5 percent FED on telecom services.
It has been learnt that the company has recently written a letter to the Provincial Finance Ministers of Punjab and Khyber Pukhtunkhwa and FBR Chairman, but none of the said departments has given time to the cellular company to clarify the legal position.
According to the letter of the mobile phone company to FBR Chairman, the governments of Punjab and Khyber Pukhtunkhwa have levied sales tax @ 17 percent, from July 1, 2010, through the Provincial Finance Act, 2010 on telecommunication services. The Provincial Finance Act, 2010 has amended the provincial sales tax ordinances.
This levy is in addition to the federal excise duty payable by the telecommunication sector @ 19.5 percent and thus results in increasing the telecommunication cost by 17 percent in respect of services provided in each of these provinces. Under the Federal Excise Act, the FBR is charging 19.5 percent duty on such services and the levy has yet not been abolished.
The provincial levy, of 17 percent, requires urgent attention as it is detrimental to the telecommunication industry and will result in negative growth due to the resultant high cost, the letter said.
Further, it is against the scheme of revenue collection on services where under the current scheme the power to levy duty is to be transferred to the provinces from the Centre thus maintaining the same duty structure and cost rather than carrying the levy of federal excise duty @ 19.5 percent in addition to the duty imposed by the provinces.
Consideration by FBR has been requested on urgent basis to provide suitable amendments in law to save the industry from hardship, allowing it to flourish and carry out business at affordable tariffs. Keeping in view the industry concerns, the FBR and Provincial Finance Ministers of Punjab should give time as the matter is extremely urgent as well as important, the letter of the mobile phone company to the FBR added.
When contacted, a senior FBR official said that the government has no intention to impose double taxation on telecom services. Tax authorities have taken up the issue of provincial sales tax on telecom services with the Ministry of Finance. It has also been brought to the notice of Prime Minister and linked to the ‘reformed GST’. It would be resolved with the consensus of provinces during implementation of the reformed GST. A meeting on the ‘reformed GST’ is expected on August 3, to be attended by provincial finance secretaries of all four provinces and officials of Finance Ministry, the official added.
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