A judicial ruling on money matters is bound to draw mixed response, depending on how favourable the precedent is to one’s financial interests. So it was the case a year ago when the apex court suspended the collection of withholding tax – akin to an advance income tax – that prepaid subscribers used to pay on mobile top ups. Users were happy, taxman sad, and cellular companies had mixed feelings about it.

Different times; different interpretations. A year ago, the fact that users lost a quarter of their mobile top-up amount to upfront taxes and about 40 percent of re-charge value to both upfront and usage taxes drew the judicial scrutiny. (For more on that development, read: “Telecom taxes: in the spotlight,” published May 7, 2018). A year later, however, their lordships have a nuanced take on the matter.

Last week, the Supreme Court reportedly restored that tax on mobile top-ups. In doing so, the court took the principled position that it would not interfere when it came to taxes. This is a noteworthy statement, implying that the court will follow a more hands-off approach on matters of tax policy and collection.

The verdict has raised expectation that other recent SC decisions may also be reversed – e.g. imposition of Re1 per liter tax on companies selling bottled water. In a parliamentary democracy, it is the government of the day that can levy or abolish a tax after acquiring necessary approval from the legislature. The business community thereby gets a breather with this judgment.

But let’s pivot back to the issue of upfront taxes on mobile recharge. The ball is now in the government’s court. It needs to itself do away with the highway robbery that is WHT on recharge. As pointed out before, it is a regressive tax that charges every user the same way, and without discriminating whether one is a tax-filer or not. Also, it hurts the affordability of mobile broadband users in a largely low-income economy.

If the government doesn’t abolish this WHT, it will again embolden cellular companies to extract their pound of flesh. Before the 2018 SC decree, companies had been charging users up to 10 percent on every account recharge in the name of “service fee”, “maintenance charge”, “administrative fee”, etc. Telco’s deduction of 10 percent of re-charge value without providing any “service”, before users can even start consuming the service, is itself a scandal.

Be that as it may, the government will be happy at the restoration of this upfront tax. Reportedly, the finance ministry is looking to create a revenue space of about Rs600 billion for next fiscal as part of impending IMF bailout. In crunch time that steep a fiscal adjustment will need to summate from many sources. The WHT restoration on mobile top-ups is expected to provide about Rs50 billion to the treasury.