SOHAIL SARFRAZ

ISLAMABAD: The Federal Board of Revenue wants to collect 19.5 percent Federal Excise Duty (FED) on telecom services under the relevant Schedule of Federal Excise Act despite the fact the levy is already being collected by provinces after the 18th Amendment at the rate of 19.5 percent of the gross value of services.

The FBR sources told Business Recorder on Wednesday that they are following the FED law in letter and spirit till now under the relevant entry of the Schedule of Federal Excise Act 2005. The provinces are collecting sales tax on telecom services as per their own provincial laws whereas the FBR is collecting FED on the same telecom services as per Federal Excise Act, 2005. If Parliament deletes the relevant entry from the Schedule of Federal Excise Act 2005, the Board would not charge FED, the sources added.

According to experts, the consumers and general public would be the actual victim of this kind of double taxation.

Tax experts were of the view that the matter of collecting 19.5 percent FED from telecom sector will lead to extra financial burden on the telecom companies if collected for earlier years. In case the telecom companies are forced to collect the same from consumer then the extra burden will also be passed on to the consumer. In such a situation the matter may end up in litigation. If the FBR will also collect 19.5 percent FED on telecom services, it will result in deduction of a total of 54 percent tax on every card and easy load on pre-paid customers.

Similarly, 54 percent tax will be deducted from post-paid customers as well. This means a card of Rs100 will only give a balance Rs46 to the consumer to make calls.

Following the 18th Amendment, the right to collect taxes on services now rests with provinces. Instead of accepting this right of provinces, the FBR wanted to charge this additional sales tax of 19.5 percent despite the fact that the provinces are also charging 19.5 percent sales tax on these services (resulting in total of 39 percent  plus 15 percent income tax), they said.

Sindh in 2011, Punjab in 2012 and subsequently KP in 2013 enacted their respective laws for levy, charge and collection of provincial sales tax. Sales tax @ 19.5 percent is a provincial right. If this additional tax is charged by operators, customer would get a balance of around Rs 35 to 40 out of total amount of Rs 100 for consumption.

The poor customers don’t have the capacity to pay the additional burden of tax. The situation becomes even worse for the customers where the rate of income tax was already increased from 10 percent to 15 percent.