FBR to propose SC for scrapping 12.5 percent WHT on Rs1,000 balance recharge

In case of this tax remaining suspended in its entirety for the next financial year 2018-19, the overall accumulated losses in terms of revenue across Pakistan would jump to Rs123 billion

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ISLAMABAD: The Federal Board of Revenue is mulling various options which include recommending the Supreme Court of Pakistan to scrap 12.5 percent withholding tax (WHT) on a customer using bills/phone cards up to Rs1,000 monthly.

This development comes amidst the decision of the SC on Monday directing cellular companies and the tax regular from collecting various taxes from customers in event of credit top-ups in prepaid phones.

SC in its decision had instructed the FBR to formulate a mechanism under which the poorest segment wouldn’t be liable for paying on easy load or scratching of phone card of Rs100.

The tax regulator is mulling to propose the SC bench to scrap 12.5 percent withholding tax for users on cards/bill user of up to Rs1,000 monthly, top officials said, reported an English daily.

General Sales Tax (GST) cannot be eliminated and another Rs10 is also subtracted by mobile phone companies on a Rs100 load normally.

GST is being collected by the FBR in Islamabad capital territory and in provinces hence this consumption tax cannot be retired since it has no relation with the income of any individual and was leviable when someone used any good or service.

Moreover, official sources shared the tax regulator had gathered over Rs47 billion from 12.5 percent WHT on mobile phones in last financial year translating to a monthly collection of Rs4 billion per month.

Also, provinces in form of GST on services were amassing over Rs70 billion hence the GST wasn’t withdrawable due to the fact it would destroy the whole tax structure of Pakistan.

In case of this tax remaining suspended in its entirety for the next financial year 2018-19, the overall accumulated losses in terms of revenue across Pakistan would jump to Rs123 billion.

In a written supply provided to the apex court, the tax regulator said another three-member SC bench in 2003 had validated the income tax, so it was a decided matter.

The FBR requested the Supreme Court (SC) to constitute a larger bench if it wanted to review the issue again.

The tax regulator in its written response to the SC said withholding tax on mobile phone cars was an adjustable tax, which was claimable by return filers at time of filing returns.

It added it was aware of increasing burden and had worked on decreasing the withholding tax rate which was brought down to 12.5 percent from 14.5 percent and was to be reduced further gradually.

Lastly, the FBR asserted this was a tax on consumption and stated if a poor man was paying sales tax on a matchbox worth Rs10, how could a tax on prepaid mobile cards be termed illegal.