Taxation of Telecommunication Services in Pakistan:
Telecommunication services play a vital role in modern societies by facilitating communication and enabling access to information. These services are subject to taxation in Pakistan, which imposes various taxes and levies on telecommunication services providers (TSPs) and their customers.
Telecommunication Services:
Telecommunication services refer to any service that enables communication between two or more parties, including voice, data, and video communication. These services are provided by TSPs, which include mobile network operators (MNOs), internet service providers (ISPs), and other companies that offer telecommunication services.
Taxation of Telecommunication Services:
The taxation of telecommunication services in Pakistan is governed by various laws, regulations, and policies. The main taxes and levies imposed on TSPs and their customers are:
Sales Tax:
Sales tax is a tax on the sale of goods and services and is levied at the rate of 17% on telecommunication services in Pakistan. This tax is collected by TSPs from their customers and deposited with the Federal Board of Revenue (FBR).
For example, if a customer purchases a mobile phone package worth PKR 1000, they will be charged a sales tax of PKR 170, and the total amount payable will be PKR 1170.
Withholding Tax:
Withholding tax is a tax on income that is deducted at the source by TSPs and deposited with the FBR. TSPs are required to deduct withholding tax at the rate of 12.5% on all telecommunication services provided to their customers.
For example, if a customer pays PKR 1000 for a mobile phone package, the TSP will deduct PKR 125 as withholding tax and deposit it with the FBR.
Federal Excise Duty:
Federal Excise Duty (FED) is a tax on certain goods and services and is levied at different rates depending on the type of service. For telecommunication services, the FED rate is 19.5%, which is collected by TSPs from their customers and deposited with the FBR.
For example, if a customer purchases a mobile phone package worth PKR 1000, they will be charged an FED of PKR 195, and the total amount payable will be PKR 1195.
Universal Service Fund (USF) Levy:
The USF is a government program that aims to provide telecommunication services to remote and underserved areas of the country. TSPs are required to contribute to the USF by paying a levy on their gross revenues. The USF levy rate is currently 1.5% of gross revenues.
For example, if a TSP earns PKR 1,000,000 in revenues, they will be required to pay a USF levy of PKR 15,000.
Advance Income Tax (AIT):
AIT is a tax on income that is collected in advance by TSPs and deposited with the FBR. TSPs are required to collect AIT at the rate of 12.5% on all telecommunication services provided to their customers.
For example, if a customer pays PKR 1000 for a mobile phone package, the TSP will collect PKR 125 as AIT and deposit it with the FBR.
Conclusion:
In conclusion, the taxation of telecommunication services in Pakistan involves various taxes and levies, including sales tax, withholding tax, FED, USF levy, and AIT. These taxes and levies are collected by TSPs from their customers and deposited with the FBR. The government uses these funds to finance various development projects and to provide telecommunication services to remote and underserved areas of the country.
