The telecom industry has sought exemption from taxes and duties on import of telecom equipment in the upcoming budget on the grounds that the costly imports are hindering in achieving targets of the government's Digital Pakistan initiative.
The customs duty for the import of equipment was 16%, however, additional customs duty of 4% and regulatory duty of 9% has further been imposed, which significantly increased the cost of network equipment for telecom operators. Also, there is no alternative available for the mobile network operators as these devices and equipment are not locally produced.
Additional customs and regulatory duties were originally imposed on certain lavish items to discourage non-essential imports. But in the process, additional customs and regulatory duties have been imposed on the import of telecom equipment.
The high cost of equipment has limited the expansion plans of mobile cellular companies and is also affecting broadband proliferation, which is one of the priority areas of the incumbent government.
The telecommunication industry has asked the government to restore SRO 575, so that the customs duty is reduced to 5%, while additional customs and regulatory duties should be abolished.
Read more: Pakistan losing revenue due to tax evasion
The industry has also sought rationalisation of sales tax and federal excise duty (FED) on telecom services. Currently, FED is charged at the rate of 17% on telecom services, which is on the higher side as compared to other sectors and also in comparison to the general rate.
Similarly, sales tax on other services in Sindh was 13%, while it was 15% in Khyber-Pakhtunkhwa and Balochistan and 16% in Punjab. However, sales tax on telecom services is 19.5% in all four jurisdictions.
A telecom industry analyst said, "Different rate of GST on services in different provinces complicates the process of tax filing and other compliances. A single sales tax rate will allow us to file single return across all jurisdictions and remove the anomalies and undue hardships being faced by the telecom sector in terms of compliances in different jurisdictions."
At the same time, the telcos have said that GST on services must be reduced since sales tax is a consumption tax, the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.
Published in The Express Tribune, June 2nd, 2021.
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