Suspension of telecom tax in Pakistan cost Rs 103 billion to telcos & government

Last year, the former Chief Justice, Saqib Nisar after taking suo moto notice suspended the telecom tax in  Pakistan questioning how the people who are not part of the tax bracket are paying taxes. The suspension was overturned this week by the three-judge bench of Supreme Court but both the telecom companies and the government, federal as well as provincial, has suffered heavy losses.

According to ProPakistani, a total of Rs. 103 billion was lost during the last 10 months when the apex court suspended the collection of service charges and telecom tax in Pakistan.

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Following are the details of the losses:

  • Telcom Companies (8-10% Service Charge): Rs 29.56 billion
  • Federal Government (12.5% Withholding tax): Rs 31.7 billion
  • Provincial Governments (19.5% General Sales Tax): Rs. 41.97 billion

The initial suspension order was issued in June 2018 and was for the course of 15 days but it was never lifted until the three-judge bench headed by Chief Justice Asif Saeed Khosa concluded that tax-related matters cannot be heard under Article 184-3 and the apex court cannot give orders on the issues of taxation.

The issue with the telecom tax in Pakistan was the uniform withholding tax which everyone had to pay whether they are eligible to pay taxes or not. Even though the Supreme Court repeatedly asked for the government to create a mechanism for the resolution of this issue, no system could be developed to single out the tax paying citizens from the others.

Current Chief Justice of Pakistan also remarked while hearing this case that government should create such a mechanism where non-filers should not have to pay telecom tax in Pakistan. Taxation is obviously a jurisdiction for executive and we will have to wait and see whether this issue will die down here or we will see the birth of a new system in the future.

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