Supreme Court on Monday suspended deduction of all taxes imposed on top up or prepaid cards and easy loads by cellphone service providers and Federal Board of Revenue and instructed both institutions to implement the decision in two days.
No More Tax of Phone Recharge
A three-judge bench comprising Chief Justice of Pakistan Mian Saqib Nisar, Justice Ijazul Ahsan and Justice Umar Ata Bandial, was hearing the case at the SC Lahore registry.
It was told earlier that each cellular company charge 5.5 percent of the as withholding tax, 19 percent as sales tax and 10 percent as a service charge, the Court had described deduction as illegal.
The court observed today that ordinary cellphone users were “being looted” due to the taxation measures in place on prepaid cards.
“How can you ask a pushcart vendor to pay taxes?” Justice Ahsan asked. “If someone doesn’t fall into the tax net, how can taxes be imposed on them?”
“It is unlawful that on a Rs100 prepaid card, only Rs64.38 is acquired,” Justice Ahsan said.
The chief justice said that only people whose cellphone usage crosses certain limits should be taxed.
Every judge said comprehensive policy should be formulated on taxes imposed on prepaid cellphone cards.
Breakdown of charges made to 100-rupee calling card
Federal Board of Revenue, had explained to Supreme court that every time a consumer load Rs 100 mobile card 12.5 percent of total amount gets deducted as adjustable withholding tax while 10 percent of whole goes to telecom company as service charges.
Not just that there is another 19.5 percent sales tax. However, it is applied on telecom company’s 10 percent rather than entire Rs100.
At this point, the consumer is left with Rs76.94 — of which the government charges 19.5pc sales tax (Rs 15) to the consumer for making calls and sending SMS.
According to FBR calculations, the net amount left for the consumer to use is left Rs61.93 on the consumption of Rs100 recharge.