Pakistan’s top court ordered the government and service providers to not to collect any service tax on mobile phone pre-paid credit (top-ups) till there is legislation on it.
In June, the Supreme Court had barred network providers and the FBR from collecting service tax on pre-paid cards, saying it was exploitative and illegal.
Prior to the court orders, the consumers were charged 10% service tax, in addition to other taxes, such as withholding tax (5.5%) and sales tax (19%). On a Rs100 pre-paid card, only Rs64 are availed by the consumers.
On Tuesday, the court upheld its June orders and directed the companies and the government to not deduct this tax till proper legislation to address this issue.
In a separate development, the Senate’s Standing Committee on IT has sought a report from the telecom regulator, which has announced to block all unregistered phones after October 20.
“How would the consumers know if their phones are smuggled or not?” asked committee’s Chairperson Mian Atiq. Karachi-based traders of mobile phones have demanded the PTA to reverse its directive of blocking unregistered mobile phones.
They said they are willing to pay Rs50 billion a year in taxes, but will not accept that directive. They threatened a country-wide strike if their demands are not met.
Earlier, the PTA had announced to block unregistered mobile phones that are smuggled into the country and evade lawful import duties, which costs the FBR millions of rupees every year. It is estimated that two to three million phones are smuggled into the country every month. The PTA thinks that blocking smuggled phones’ access to networks can help the government increase its revenue by Rs15 to 20 billion.