Cellular firms want ‘friendly’ budget
By Zulqernain Tahir
LAHORE: On the request of the Pakistan Telecommunications Authority (PTA), the government may reduce General Sales Tax (GST) and SIM activation charges on telecom services in the upcoming budget.
The PTA will move the proposal on the demand of telecom companies, which plead that their revenue has been shrunk “drastically” owing to heavy taxes and stiff competition.
PTA Chairman Dr Muhammad Yasin told Dawn on Thursday if the government accepted the authority’s suggestions, it would encourage the foreign direct investments (FDIs) and help sustain growth in the sector.
The chairman, however, clarified that the PTA did not recommend reduction in the GST and SIM activation tax in certain percentage. “We have only requested the government to seriously consider reduction in both forms of taxes,” he added.
In the last budget, the federal government enhanced the GST by six per cent on telecom services making it 21 per cent while only one per cent increased on the rest of the industries (16 per cent). The government’s SIM activation charges are also Rs500.
A cellular company representative said that in the proposals for 2009-10 budget, they had requested the government through the PTA not to adopt any hostile policy towards the telecom sector and reduce tax to meet the challenges posed by the ongoing recession. The revenue of the telecom sector has shrunk in the last two quarters of the current fiscal year after tax enhancement.
According to a PTA report, in April-June 2008, the Federal Board of Revenue (FBR) collected Rs12.4 billion from the telecom sector with 15 per cent GST. The receipts in the period of July-Sept and Oct-Dec 2008 were recorded as Rs11.4 billion and Rs11.7 billion with 21 per cent GST. The contribution of the telecom sector to overall revenue generation (GST) declined 18.7 per cent in July-Dec 2008 as compared to 24.6 per cent in the same period of 2007. The cellular industry had generated revenue of Rs278 billion in 2007-08. The previous taxation rate on the cellular services (15 per cent) is already one of the highest in the region. Owing to stiff competition among the cellular operators in the country, lower tariff have been introduced to attract maximum subscribers. However, after enhancement of the tax the tariff is no longer low. The substantial increase in the tax has witnessed an adverse impact on the growth pattern of the industry.
The telecom sector, according to the PTA, has attracted more than $5.6 billion foreign investment in the last four years. In 2007-08, $1.4 billion FDI was invested (in the telecom sector) which is about 30 per cent of the total FDI in the country. In 2007-08, the telecom sector ranked second after financial sector as major FDI recipient of FDI in Pakistan.