Interconnection charges case: cellular companies'' CEOs fear arrest, National Assembly body told

The representatives of the mobile phone operators have informed the National Assembly Standing Committee on Information Technology here on Tuesday that cellular companies were so much harassed that they started fearing their Chief Executives might be arrested during the investigation into the case of interconnection charges being investigated by the National Accountability Bureau (NAB).
Niaz Hussain Brohi, Director Legal Affairs of a cellular company informed the committee that the hype was deliberately created against the mobile phone operators in the media and a wrong impression was being created of the taxpayers'' complaints. "We were given no time to explain our viewpoint as the NAB suddenly intervened and started investigation into the case. Despite the fact that no revenue loss is involved in the interconnection charges, the companies were so much bogged down that they were apprehending that their Chief Executives might be arrested in interconnection charges case. He said that the investors in the cellular companies have been harassed unnecessarily in the said case which sent a wrong signal to the investors and regular taxpayers of the country.
Chairman of the committee, Chaudhry Muhammad Barjees Tahir asked about the payment of taxes deposited by the mobile phone operators excluding 19.5 percent Federal Excise Duty (FED) and other taxes charged from the consumers. The mobile companies should share data about the actual payment of taxes made from their own pocket because 19.5 percent FED is recovered from the subscribers.
Responding to the query, a representative of mobile company said that 19.5 percent FED is collected by the companies on behalf of the government. The amount is deposited in the relevant head of account of the Federal Board of Revenue (FBR) and the 19.5 percent FED is not retained by the cellular companies. It is the mandate of the legislator to rationalise the rate of taxes and mobile companies are acting as agents and only collecting the amount on behalf of the government. Out of every Rs 100, Rs 27-28 is being deposited in the national kitty.
In a statement before the committee, the cellular companies said that the media is giving wrong impression to the public that the Cellular Mobile Operators (CMOs) are evading taxes on interconnect calls and that they are being given a special exemption under section 65 of the Sales Tax Act 1990. The callers pay sales tax at the rate of 19.5 percent as the call charges (including calling party network plus receiving party network) ie call charges includes the interconnect revenue. Therefore, there is no evasion of sales tax on interconnection charges. Hence, no further tax is payable separately on the interconnection charges because the telecom operators have already collected and deposited the complete amount of sales tax.