The decision was made in a meeting of the telecom sector with PRA chairman Iftikhar Qutab here on Tuesday. Following this decision, PRA is expecting around Rs 2.5 billion under this head in the maiden month, Qutab said.

The tax representatives of all telecommunication companies operating in Pakistan attended the meeting and assured their full support to the PRA and the Punjab government on the matter of sales tax on services.

According to the minutes of the meeting, the telecom companies will deposit the sales tax of post-paid services for the month of June, 2012 directly to the Punjab government.

PRA asked the telecom companies to deposit tax of post-paid services pertaining to the month of June, 2012 directly to the Punjab Government instead of the Federal Board of Revenue (FBR).

Some representatives said that it might result in an argumentation between the federation and the Punjab. The chairperson assured the participants that such an event would not arise as the 1973 Constitution grants the right of taxation on services to the provinces and the sales tax chargeable under the Punjab Sales Tax Ordinance, 2000 was also the provincial sales tax and is an inherent right of the Punjab government.

The telecom companies were asked to provide their feedback, if required, to suitably amend the rules, which are otherwise based on international value added tax (VAT) practices, in accordance with the local business realities.

The companies will pay Punjab sales tax on services on actual share basis instead of traditional mode of formula-based share payment as they have fully upgraded their accounting systems to work out actual share of all the tax authorities including Sindh Revenue Board (SRB), FBR and PRA.

The companies will send their proposal for minor amendment in Chapter-IV of the Punjab Sales Tax on Services (Specific Provisions) Rules, 2012 and in the rules relating input tax adjustment to accommodate the actual business practices as respected previously and for more clarity in their Punjab sales tax assessments.

The PRA will take up with FBR and SRB for introducing a single return for telecom companies with direct payments to the respective tax authorities under the irrelevant heads of account.

The issues of harmonisation of regulatory provisions and compliance processes will also be taken up by PRA with FBR and SRB on receipt of feedback from the companies.

The telecommunication companies have also nominated Mirza Taqi-ud-Din Ahmad, Partner of A.F Ferguson to coordinate with PRA on their behalf.

‘The sectoral meeting has been started after launching the PRA website and next meetings would be held with banks and courier services providers. Telecommunication services are major source of tax for the province which will contain almost 80 percent of total revenue target of Rs 40 billion for FY13,’ Qutab said.

According to the Punjab Finance Department officials, out of Rs 40 billion total revenue 95 percent will be collected from four major services, telecom, banks, insurance and courier while the remaining 5 percent will come from other services.