GST collection on pre-paid calling cards: FBR tries to plug revenue leakage

The Federal Board of Revenue (FBR) has started an exercise to check revenue leakage during collection of general sales tax (GST) on sale of pre-paid calling cards by cellular, wireless phone and internet companies. Sources told Business Recorder on Friday that the FBR started its consultations with Pakistan Telecommunication Authority (PTA) to probe the issue on the complaint filed by Transparency International-Pakistan.
The FBR also asked the Chief Executive Officers (CEOs) of all telecom operators to submit their comments on the collection of the GST on sale of pre-paid calling cards. According to an estimate, the FBR can generate around Rs 8-10 billion in a month from pre-paid calling cards, sources added. According to a Transparency International-Pakistan letter sent to the FBR Chairman Ali Arshad Hakeem, Transparency International-Pakistan recommended tax authorities to make a fool-proof system for the transfer of the GST collected on sale of pre-paid cards by telecom operators, wireless phone and internet companies.
"These prepaid cards are sold to outlets/shopkeepers in cash by all these companies and then the outlets sell them to the general public," it maintained. The FBR may formulate a policy and direct all cellular companies, wireless phone and internet service providers to get the pre-paid cards stamped as GST collected and numbered by the FBR prior to sale.
These companies shall deposit 19.5 percent GST and 10 percent withholding tax when they take the delivery of pre-paid cards dully stamped and numbered by the FBR. This is not a new procedure and is a normal procedure of collection of the government's revenue from the cigarette companies and others and the GoP revenue is collected before the product leaves the factory gates/premises.
Through the introduction of the new system, the leakage of GST on pre-paid cards will be stopped and the FBR is expected to collect 100 percent GST on pre-paid cards (According to the system suggested by the Transparency International-Pakistan, estimated revenue would be Rs 8-10 billion a month). This will also enable savings on loss of bank interest in the delayed deposit of the GST of 30 days as per current procedure which will add billions of rupees of revenue to the national exchequer, Transparency International-Pakistan added.