Sindh Budget 2015-16: Saving Rs1 on a recharge of Rs100

Sindh budget proposes to cut GST on telecom services to 18%.

KARACHI: In an effort to gain public approval, the Sindh government that unveiled its budget for fiscal year (FY) 2016 on Saturday proposed to slash general sales tax (GST) on telecom services by 1.5% – meaning the cellular service consumers in the province would pay a rupee less on taxes every time they top up their balance by Rs100.

According to the proposal, the GST on telecom services will be reduced from the current 19.5% to 18%.

The proposal, if approved, would save Sindh-based consumers (approximately) Rs0.95 on a recharge of Rs100.

In other words, consumers in Sindh will be paying Rs0.36 per minute in GST on every call (assuming a rate of Rs2 per minute) compared to Rs0.39 per minute they are paying now.

It is for the first time that a provincial government reduced GST on telecom services since the matter came to provincial jurisdiction five years ago as a result of the 18th Amendment – the GST on telecom services was reduced from 21% to 19.5% in FY10.

In general, consumers pay about Rs63 in different types of taxes on a prepaid card of Rs100, which breaks down to Rs12.28 as federal withholding tax and Rs12 as admin charges inclusive of federal excise duty (FED). Of the remaining amount, about Rs12.37 or 19.5% is paid in GST to the provincial government.

“It’s a small step in the right direction but a lot more needs to be done,” an industry official said. The consumers will certainly benefit from the tax cut but it will be challenging for the industry to apply a specific rate for Sindh, he said, adding that taxation should be rationalised – the same rate should be applied by all provinces.

The official further said the provincial government should bring telecom GST at par with other sectors that is 17%.

What was even more disappointing, the official added, that the government did not mention whether they were withdrawing their previous proposal of taxing data services.

The Sindh government had proposed 19.5% GST on data (Internet) services last year but after public opposition it withheld the proposal. Later, the Sindh High Court referred the matter to Sindh Revenue Board, which has yet to decide whether the proposed tax should be imposed or withdrawn.

“Had they withdrawn the proposal of taxing the data services in Sindh budget, it would have been a nice gesture on their part just like the one shown by Punjab government,” the official said referring to the Punjab government, which in its budget, reversed the May 29 SRO that had imposed 19.5% GST on data service.

Published in The Express Tribune, June 14^th, 2015.

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