ISLAMABAD: The telecom sector has asked the budget makers to slash down tax rates of With-holding Tax (WHT) on subscribers, harmonise the General Sales Tax (GST) on services, and bring it down from 19.5 per cent to 16pc across the country.
There is a total of 34.5pc tax on the telecom sector, out of which 15pc is charged from subscribers and 19.5pc is charged as GST on services. The telecom sector has proposed to bring down the Withholding Tax from 15 to 10pc in the next budget and then abolish it gradually.
It has been proposed to harmonize the GST rate on telecom services in Islamabad Capital Territory (ICT) and all four provinces.
The IT and Telecom sector submitted the budget proposals to the government, which also proposed Advance tax may be reinstated as per the Finance Act 2021 to improve the purchasing power of customers, as the majority of the customers are below the taxable limit.
The proposals maintained that Cellular Mobile Operators are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites which are thousands in numbers as a result this increases the cost and complexity in compliance and an additional administrative burden for the telecom sector.
Verification of claim of this tax collection on bills by tax authorities is also not possible and can save authorities from operational burden. Further, withholding tax deducted from telecom services is treated as minimum tax which is against the principle of taxation as this is payable even in loss making years.
They further proposed that Withholding tax on telecom services 4pc under Section 153 to be adjustable instead of minimum tax. The shift from an adjustable income tax to a minimum tax has effectively reclassified income tax from a direct tax to an indirect tax. This is because the amount of tax payable is no longer tied to the actual income earned, but rather a fixed charge that applies uniformly, irrespective of the company’s profitability.
The sector proposed for increase carry forward period of minimum tax credit under Section 113 from three years to five years and bring it back to the position prior to Finance Act 2024. Payback period of telecom sector is very slow and it takes longer time to recover the return on investment ranging from 8 to 10 years. So limiting the credit to 3 years is not sustainable for loss making companies, they added. The proposal also includes removal of the regulatory duty rates on telecom power equipment which are not locally manufactured. Moreover, telecom services sector should be excluded from retail price list because they don’t import the goods for direct sale.
Aamir Ibrahim, CEO Jazz and Chairman Telecom Operators Association said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector.
Pakistan’s tax burden, he said, is disproportionately carried by a narrow group of compliant individuals and industries. To build a sustainable digital economy, we need to widen the tax net—bringing more participants into the formal economy—rather than repeatedly taxing those who are already contributing.
“Telecom is not a luxury—it is a critical utility, much like electricity or clean water. Overburdening this sector with excessive taxation is not just economically counterproductive—it’s socially regressive. We must recognize telecom as the digital backbone of every other sector and treat it as such in our fiscal policies”, CEO Jazz added.