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The government Friday warned the cellular mobile operators (CMOs) of stern action if consumers are charged more than the notified tariffs and applicable taxes. CMOs are deducting only withholding tax and general sales tax/federal excise duty on the pre-paid recharge/reload after restoration of taxes by the Supreme Court, Pakistan Telecommunication Authority (PTA) said.

"With reference to taxes applied on the recharge/reload of prepaid balance, it is stated that cellular mobile operators (CMOs) are deducting only Withholding Tax and General Sales Tax/Federal Excise Duty on the pre-paid recharge/reload after restoration of taxes by the Supreme Court of Pakistan from April 2019," PTA said Friday.

It further stated that on the recharge of Rs 100, balance provided to the user is Rs 88.889 (and not Rs 76 as reported on the social media) after deduction of Rs 11.111 against withholding tax @ 12.5%.

The GST @19.5% is applied on per call, SMS, and data usage basis. When a user consumes its remaining balance of Rs 88.889, a total of Rs 14.505 as GST are charged. Due to lack of clarity on the deduction of GST in addition to WHT, mobile subscribers are assuming that CMOs are charging well above applicable taxes, which is not correct.

Furthermore, the PTA has fixed a ceiling on call setup charges @ Rs 0.15 per call. The PTA is vigilant about the rates/tariffs being charged by CMOs and action will be initiated on any reported incidence of charging above the published tariffs and applicable taxes in accordance with the law.

The Ministry of Finance and Revenue has also stated that consumers of cellular phone companies are charged only once i.e. at the time of payment of the card.

The ministry submitted in the National Assembly that consumers of cellular phone companies are charged only once i.e. at the time of payment of the card.

MNA Shazia Marri from PPP raised a question in the Parliament last week, asking, "Will the minister for finance and revenue be pleased to state: whether it is a fact that consumers of cellular phone companies are charged different taxes/duties/levies/fees etc. twice, one at the time of recharge of any amount and second at the time of making calls or subscribing different packages by using the same credit."

The Finance Ministry stated that consumers/user of mobile phones do not pay tax twice i.e. at the time of recharge of balance and on making call/activation of package.

The tax is charged only once on the basis of amount of card. The message user receives at the end of a call is in fact a breakup of already paid taxes in accordance with minutes of the call which is an effort by phone companies to become more transparent.

Such messages do not mean that the overall payment of taxes can exceed the taxes levied which remain fixed in relation to amount of card/bill. There are no two charges as explained above. However, for the sake of clarification the breakup of taxes on mobile phones is given as: (i) phone bill and (ii) Taxes...(a) Provincial Sales Tax; (b) Income Tax @ 12.5% of bill since the provincial Sales Tax is not applicable in ICT, therefore to ensure price equalization Federal Excise Duty (FED) is charged on the said amount.

The Income Tax so charged is adjustable against annual tax liability of a person. Such advance Income Tax has also been upheld by the Supreme Court in its recent judgment, the ministry added.

Copyright Business Recorder, 2020

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