FBR to suggest SC to abolish WHT on consumers using Rs1,000 card

Islamabad : With suspension of all taxes on mobile phone cards for next 15 days on the orders of Supreme Court (SC) with effect from Wednesday midnight, the Federal Board of Revenue (FBR) is contemplating upon different options including suggesting the apex court to abolish withholding tax (WHT) of 12.5 percent on customers using phone cards/bills up to Rs1000 limits on per month basis.

“This possible mechanism is under consideration at the FBR as the highest court of the country has directed the tax authorities to come up with such a mechanism under which the poorest of the poor will not be liable to pay tax on scratching of phone card of Rs100. We are considering to suggest the SC bench to abolish withholding tax of 12.5 percent on cards/bill user of up to Rs1000 on monthly basis on the pattern of PTCL,” top official sources confirmed to The News here on Wednesday.

The Supreme Court had suspended collection of taxes on mobile phones and directed the FBR to devise a mechanism in next 15 days. Now the FBR is contemplating upon different options to handle this arising situation under which one possible way out can be proposing to the court to abolish withholding tax (WHT) on phone card users up to Rs1000 per month. However, the GST on services could not be abolished. Another Rs10 were deducted by the mobile phone companies on Rs100 card but it is not yet known how the apex court will be telling the companies about their business models in an environment which is labeled as free market economy.

However, the General Sales Tax (GST) being collected by the FBR for Islamabad Capital Territory (ICT) and provinces in their respective jurisdiction cannot be withdrawn because consumption tax had nothing to do with the income of anyone and it was charged when someone used any good or service.

The official sources said that the FBR had collected over Rs47 billion from 12.5 percent WHT on mobile phones in last fiscal year so on average the collection stood at Rs4 billion per month.

While provinces in shape of GST on services, the FBR sources said, had collected over Rs70 billion so the GST could not be withdrawn because if it was abolished it would devastate the whole tax structure of the country.

The FBR in its submission before the apex court had argued a three member bench of Supreme Court of Pakistan in 2003 had declared income tax on phone cards as valid tax so if the SC wanted to take up this issue again then a larger bench should be constituted for consideration. But the apex court rejected this argument.

The tax on mobile phone card is phenomena in all other countries including India, Bangladesh, Thailand and others but the mobile calls in Pakistan are cheapest among the neighbouring as well as around the world.