FED on telecom services on the cards?

If recent news reports are anything to go by, the government is mulling levying Federal Excise Duty (FED) on telecom services across the country. The ''mini-budget'' is just days away, and it will soon be clear if the news holds any ground. But if there is any truth to it, the government is best advised to not take this route, as it will in all likelihood backfire, and create unnecessary controversy, between federation and provinces.
Recall that the honorable Sindh High Court had earlier settled the issue, in a detailed decision, ordering the FED to be abolished in retrospect. The federal government had not only honoured the decision but also made necessary changes in the FED Act. Any such adventure, will not only be in complete negation of the court''s order but will also be in conflict with provincial sales tax collection on services, the nomenclature of which was mutually agreed upon in 2010 - via a Record Note signed by the federal and provincial finance secretaries of the time.
Renowned tax experts believe that any such move will not yield a single penny in form of tax revenues -as the aggrieved parties (provinces) will likely get a stay from the honourable courts. Should the government decide to levy the FED over and above the provincial sales tax, it will create a scenario of double taxation.
The apex court has already suspended the sales tax on telecom services, which has taken away a huge chunk of provincial tax revenue. Sindh, for instance, collected Rs 13 billion in services sales tax on telecom, with the second highest category share of 13 percent. That share has already fallen to just 6 percent in the first quarter of FY19 - and is likely to be even lower for the remaining quarters.
Tax on telecom services are part of the aforementioned Record Note signed on September 28, 2010 - under Group II, which refers to services where the origin is clearly identifiable. The FBR is clearly under pressure to jack up revenues, but the same old exercise of triggering the wrong button to pluck the easy fruit, must not be repeated, especially when it is least likely to lead to more litigation and no revenues. Time will tell if the FBR has clearly been divorced of the policymaking. And if it turns out to be a decision made by the government, it is unwarranted, and also all set to backfire.