ISLAMABAD: The Federal Board of Revenue (FBR) may generate additional Rs4.5 billion as advance income tax from cellular services as tax rate has been increased through mini-budget.
The government has increased the withholding tax rates on cellular services to 15 per cent from existing 10 per cent in the mini-budget announced on December 30, 2021.
The increase in advance tax rates on cellular services to generate Rs4.5 billion.
The changes in the withholding tax regime on usage of internet and mobile phones services have been brought through the Finance (Supplementary) Bill, 2021.
The FBR said that through the Finance Act, 2021 federal excise duty (FED) was levied on telecom services. However, telecom companies challenged the duty and got a favourable decision.
“A marginal increase in adjustable advance tax has been proposed from 10 per cent to 15 per cent to make up for revenue loss from telecos,” the FBR added.
The rate of tax has been proposed to increase to 15 per cent from existing 10 per cent for tax year 2022 and eight per cent onwards of the amount of the bill or sales price of internet prepaid card or prepaid telephone card or sale of units through any electronic medium or whatever form from subscriber of internet, mobile telephone and pre-paid internet or telephone card.
The FBR collects the advance tax on telephone and internet users under Section 236 of Income Tax Ordinance, 2001.
According to the ordinance:
“Telephone and internet users.- (1) Advance tax at the rates specified in Division V Part IV of the First Schedule shall be collected on the amount of – (a) telephone bill of a subscriber; (b) prepaid cards for telephones; (c) sale of units through any electronic medium or whatever form ; and (d) internet bill of a subscriber; and (e) prepaid cards for internet.
(2) The person preparing the telephone or internet bill shall charge advance tax under sub-section (1) in the manner telephone or internet charges are charged.
(3) The person issuing or selling prepaid cards for telephones or the internet shall collect advance tax under sub-section (1) from the purchasers at the time of issuance or sale of cards.
(3A) The person issuing or selling units through any electronic medium or whatever form shall collect advance tax under sub-section (1) from the purchaser at the time of issuance of sale of units.
(4) Advance tax under this section shall not be collected from the Government, a foreign diplomat, a diplomatic mission in Pakistan, or a person who produces a certificate from the Commissioner that his income during the tax year is exempt from tax.”
