IT ministry proposes major tax relief measures

Islamabad: The Ministry of Information Technology and Telecommunication has proposed a number of tax relief measures, including abolishing the current 12.5pc advance tax, and reducing the federal excise duty on telecom services from 17% to 16%.

In addition to these measures, it has also been proposed to withdraw the Rs 250 issuance tax on sale of new SIM cards. The government may also accept the recent decision of the Lahore High Court in favour of Ufone and Zong, instead of challenging it.  This would, however, mean that the government would follow the court’s verdict for all mobile operators and not just the two involved in the case.

Furthermore, the ministry has also floated the idea of introducing a simplified advance tax mechanism, exemption from all withholding and collection provision under ITO, 2001. This will not result in any tax break for the industry. They stated that similar exemptions have already been afforded in the banking and oil industries.

Sources said that the ministry is recommending that the telecom sector (all PTA licenses) should be included in the division III of part III of the income tax ordinance to grant relief of 3% minimum tax instead of 8% tax on all telecom services.

Pakistan telecom companies are dependent to import various equipment under HS code 8517 and HS code 8544. It has also been proposed to abolish regulatory duty on these equipment and additional custom duty on raw material be brought down from current level of 20% and 7% to the level of 5% and 3% respectively. Sources said that these proposals have also been recommended by the Prime Minister’ Task force on Information Technology and Telecom.

The telecom companies have also been informed about their contributions and any Corporate-Social-Responsibility projects they may have taken on in view of the Covid-19 pandemic. The ministry admitted that the telecom sector has not been provided as much relief during the course of the pandemic compared to the other sector of economy.

However, the ministry maintained that consideration of these proposals will contribute to the expansion and improvement of telecommunication services in Pakistan. It is also being hoped that these change will open avenues for further investment and employment in the sector, especially while the Covid-19 pandemic is still going on. This will be particularly important because the government is continuing to pursue its vision of digital enablement.

It is pertinent to mention here that the Economic Coordination Committee on Thursday decided that a proposal may be submitted in the next meeting after through deliberation of its impact on the already vague taxation policies currently in place.