Pakistan has the highest sales tax rate of 19.5 percent on telecom sector, as compared to other regional countries, which may impede its unprecedented growth. The sources told Business Recorder here on Thursday that the data provided in the official documents of Pakistan Telecommunication Authority (PTA) revealed Pakistan has 19.5% sales tax on telecom sector against 10.3 percent in India, 13 percent in Nepal and 15 percent in Bangladesh.
According to the data, Pakistan telecom sector contributes steady inflow of heavy tax collections under major heads like Activation Tax, GST/FED, the PTA fee and charges and others. The PTA has been advocating to reduce the tax burden on the sector, which it considers as an impediment for its growth.
Though, upon the constant plea of the regulator, the government reduced the Activation Tax from Rs 2000 per connection to Rs 250 and also reduced Federal Excise Duty from 21% to 19.5%, the tax rate still appears to be on higher side when compared with the regional economies.
Despite having lowest call rates in the region, the actual price of calls that the Pakistani telecom customers are paying is higher than what it should be. The VAT rate in Pakistan for telecom sector is about 52% higher than that of India, and in case of Sri Lanka the tax rate is almost equal.
The telecom sector contributed over Rs 510 billion to the national kitty in the last 5 years. At the end of 2009-2010, the sector contributed over 109 billion to the national kitty of which GST was over Rs 44 billion. It is expected that telecom sector contribution in national sources would multiply after the launch of 3G services in Pakistan.
The sources said that any new initiatives in Foreign Direct Investment are likely to affect the telecom sector and business environment of the country in a positive way. With rising population, and consequently the demand, the potential telecom market would keep growing. With the latest technologies further investment prospects are looking up.
With 3G licensing, the network coverage would increase especially in the areas left out and broadband services will reach all corners of the country. Similarly, increased value-added services, improved subscriber base and enhancement in voice services would result in a widened tax base. With the auction of 3G licenses in Pakistan the government estimates an influx of Rs 50 billion funds from the telecom sector, the sources added.
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