Cellular companies seek status of 'industrial undertakings'

Chief Executive Officers (CEOs) of four leading cellular companies have jointly approached Finance Minister Ishaq Dar seeking is status of 'industrial undertakings', as the cellular companies have has paid over Rs 11 billion as withholding tax on the auction of 3G/4G licences on government's assurance that it would grant them status of 'Industrial Undertakings' in 2014-15 federal budget.
Sources told Business Recorder here on Sunday that the four top telecom companies have jointly signed a letter and communicated to the Finance Minister for necessary action.
According to the in letter of the issue of the industrial status for cellular mobile industry was discussed in the meetings held before budget in June 2014 with Finance Minister during the negotiations for finalising the way forward for the payment of 10 percent withholding tax (levied under Section 236-A of the Income Tax Ordinance 2001) on the proceeds of the Next Generation Mobile Services (NGMS) auction by the cellular mobile operators (CMOs). The CMOs were assured by Finance Ministry on behalf of the Government of Pakistan about the grant of an Industrial Undertaking status to them by FBR through the Finance Act 2014 (Federal budget for 2014-15).
Based on these assurances by the GoP, NGMS licences have paid more than Rs 11 billion as Advance Income Tax (Withholding Tax) on the amount paid for the acquisition of 3G and 4G licenses, which is much more than their current or even next few years' liability under the Income Tax Ordinance 2001.
"However much to the despair of us all; Industrial Undertaking status was not granted to the cellular mobile industry through the Finance Bill 2014-15 despite industry's reminders sent to FM's office based on the assurance of GoP," letter said.
The letter said that consequent to the approval by the Federal Cabinet in year 2004 the Ministry of Industries & Production vide its SRO number 1(II)/2004-InvIII dated April 20, 2004 had already classified the Telecom sector, including "Cellular Operators" as "Industry". In addition the Mobile Cellular Policy issued by the Ministry of Information Technology ("MoIT") dated January 28, 2004 also referred to CMOs as "Industry" (please refer to clauses 1 and 3.2 of the said Policy).
However, the Federal Board of Revenue (FBR) had indicated that since MoIT has not declared the CMOs as "Industry" therefore it is not willing to grant such a statue to the CMOs.
The CMOs have also referred to the letter of the Secretary, Ministry of IT addressed to the Chairman FBR (dated 18th June, 2014) which not only clearly admits the stance of the Cellular Industry in this regard but dearly conveys about the classification of the CMOs as "Industrial Undertaking" under clause (b) of section 2(29C) of the Income Tax Ordinance, 2001.
Therefore it's imperative that GoP stands to its commitment with the CMOS with regards to provision of status of an "Industry" for the tax relief at the import stage by FBR thereby reducing the period of the adjustment of this Advance Income Tax paid thereof, it maintained.
The industry has once again requested the FM to extend his usual support to honour the commitment extended by him, in order to process the matter through FBR. This will have far reaching impact on the confidence of foreign shareholders for strengthening their commitment for continued investment in the cellular sector in Pakistan fulfilling the objectives of all stakeholders involved therein including the GoP, letter added.