21pc tax deduction begins: Cell phone use -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

21pc tax deduction begins: Cell phone use

LAHORE, July 3: The cell-phone companies have started informing their subscribers through SMS that from July 1 they will have to pay General Sales Tax (GST)/Central Excise Duty (CED) at the rate of 21 per cent instead of 15 per cent.

The taxation rate on the cellular services till June 30 was 15 per cent, already one of the highest in the region.

In 2008-09 budget, the GST/CED on all other industries has been increased by one per cent but the telecom services are subjected to six per cent hike.

According to a telecom industry analyst, with the imposition of 21 per cent CED the cell-phone users will have to pay an additional Rs15 billion at least during this fiscal year. The industry had generated Rs253 billion in 2006-07 fiscal and was expected to generate more during 2007-08 because of phenomenal increase in cell-phone users, now touching 85 million mark.

The analyst said the cellular industry had a mobile penetration of 52 per cent and further growth was expected. “Until 2001, the service was restricted to the well-offs but today every segment of society is using the facility at affordable rates.”

He further maintained that the increase in CED would be directly borne by the consumers and have an adverse impact on the growth pattern of the industry as well. “In addition to CED, which has been imposed on customers at the rate of 21 per cent, the companies are also bearing Rs500 activation tax,” he said.

The telecom industry contributed more than Rs100 billion to the national exchequer in different heads in 2006-07 fiscal.

Besides increasing the CED by six per cent on telecom sector, Rs500 tax on each cell phone handset has also been imposed.

“The increase in taxation will hamper the growth of telecom sector, besides making it difficult for the rural population to enjoy this service,” a franchise owner said who believed that this was the time to provide the facility to the rural population. The telecom companies are already expanding their networks in the rural areas.
Source: Dawn