ISLAMABAD, September 14, 2024 – The Federal Board of Revenue (FBR) and provincial revenue authorities are set to resume the collection of withholding tax on mobile phone top-ups following a decision by the Supreme Court of Pakistan (SCP) on Wednesday.
The apex court reinstated all taxes charged by cellular service providers on mobile phone top-up cards. Chief Justice Asif Saeed Khosa delivered the short order, stating that the court would not interfere in public revenue matters or tax collection processes. This verdict allows FBR to collect tax.
Supreme Court Restores Mobile Phone Taxes
In a hearing earlier today, the Supreme Court withdrew its stay order, issued in June 2018, which had suspended the collection of taxes on prepaid mobile top-up cards by the FBR. The court’s decision effectively restores the deduction of taxes on mobile phone usage, which had been halted due to a suo motu case.
The suspension of mobile phone taxes had significantly impacted the collection of public revenue, leading to pressure on both federal and provincial governments to resume taxation. The court’s ruling has now cleared the path for tax authorities to start collecting these levies again.
Tax Rates on Mobile Phone Top-ups
Following the court’s verdict, the FBR will charge 12.5% as withholding tax on every mobile phone top-up. Provincial revenue authorities will also resume collecting sales tax on mobile services, with rates ranging from 17% to 19%, depending on the region.
These taxes will apply to all mobile phone services, including prepaid and postpaid users. The restoration of taxes is expected to bring in significant revenue for both federal and provincial authorities, which had faced shortfalls due to the suspension of these levies over the past few years.
Background of the Case
The Supreme Court had originally suspended the deduction of taxes on prepaid mobile cards in June 2018, following complaints from consumers and concerns about the fairness of the tax system. The case was heard by a three-member special bench, led by Chief Justice Asif Saeed Khosa, which reserved its judgment after a thorough hearing.
During the hearing, law officers representing the federal and provincial governments presented their arguments, stressing the importance of tax collection for public revenue. After considering these submissions, the court decided to lift the suspension, allowing tax authorities to resume their duties.
Impact on Consumers and Revenue Collection
With the restoration of taxes, consumers will now see deductions on mobile phone top-ups, which could lead to higher overall costs for mobile phone services. However, this move is expected to stabilize revenue collection for the government, helping fund essential public services.
