The Federal Government has presented the budget proposals of worth Rs. 4.75 trillion for the fiscal year 2017-18 in the National Assembly of Pakistan. Minister for Finance, Ishaq Dar, read the whole document of budget speech for the legislators.
The government claimed to achieve phenomenal progress and vowed to bring more reforms in the next fiscal year, however the common man and prominent financial experts have different opinions that the ground realities are quite different than those depicted in the speech of Finance Minister.
Mr. Dar has presented a number of measures to facilitate the Telecom sector including reduction in taxes and other duties on services and equipment. Let us have a look on these proposals focusing Telecom Industry one by one.
1. Reduction of Taxes on Mobile Phone Services
As revealed from Budget document, the government has decided to reduce taxes on mobile phone subscribers in the name of Withholding Tax and Federal Excise Duty.
According to the proposed layout, Withholding Tax (WHT) or income tax for mobile phone subscribers is going to be reduced from 14% to 12.5%.
Moreover, Federal Excise Duty (FED), which is applicable for Islamabad, Balochistan and tribal areas has been reduced from 18.5% to 17%. (FED is not deducted for mobile services used in provinces, instead they charge GST at various rates).
Keep in mind that provinces are charging up to 19.5% as GST, which has no link to this budget. However, Federal government has urged the provincial authorities to slash the rates and also bring it down to 17%.
Reduction in these taxes will enable to get more credit when you recharge your mobile account. Furthermore, there will be less tax on your balance usage.
Decision is going to impact positively on 140 million mobile phone users in the country.
2. Reduction of Taxes on Smartphones
The government has not only reduced taxes for mobile phone users but also brought a tax reduction on certain kind of smartphones, the budget document has claimed.
The proposed budget says that import duty on low end smartphones will be reduced to Rs. 650 from Rs. 1,000. It must be mentioned that there were three categories of handsets as following:
- Feature phone – Import Duty: Rs. 300
- Low end smartphone – Import Duty: Rs. 650 (Previously it was Rs. 1,000)
- High end smartphone – Import Duty: Rs. 1,500
It must be noted here that import duty for two other categories of phones will remain intact.
With this tax reduction mid-range and low-end phones will see a price reduction, as most of the smartphone companies in Pakistan adjust their prices according to taxes and import duties.
Government said that step is taken to increase the uptake of smartphones in the country.
3. Elimination of Custom Duty on Imports of Telecom Equipment
In order to facilitate the Telecom sector, the government proposed to withdraw currently applicable customs duties at the rates of 11% and 16%, however it introduced a uniform rate of 9% Regulatory Duty on telecom equipment.
It is noteworthy that the government had doubled the custom duty on telecom equipment back in 2014 from 5 percent to 10 percent, which was gradually increased in later years by the same government. We see a complete withdrawal of custom duties, rather replacement with regulatory duty through slightly lesser rate.
The removal of Custom Duty and its replacement with Regulatory Duty will be a relief for telecom operators to some extent, particularly those operators who working on their expansion plans for the deployment of 3G and 4G services.
Now, the government is taking credit for giving relief to telecom sector by removing one duty and imposing another duty of 6%.