ISLAMABAD: The telecommunication sector has received several relief measures in the federal budget 2021/2022 that will help new investment in this sector.
According to budget commentary released by KPMG Taseer Hadi & Co. Telecommunication is one of the largest service sectors of Pakistan contributing substantial revenue in the form of taxes on telecom services and income tax on profits.
The Finance Bill 2021 proposes several relief measures for this sector, some of them were being demanded for long, such as grant of ‘industry’ status for tax purposes.
These measures will help to attract investment in telecom infrastructure and reduce the cost of doing business and consequential relief to the public.
Following tax relief measures are proposed for this sector:
—Grant of industry status which will resolve several anomalies in taxation of this sector. Also, it will make it possible for telecom companies to import plant and machinery without collection of advance tax after obtaining exemption certificate from the Commissioner.
—Reduction in rate of withholding tax on receipts from 8% at present to 3%. As the said tax is also minimum tax, this will entail a reduction of 62.5% in effective tax rate on income for those with low profits.
—Reduction in rate of federal excise duty on telecom services from 17 percent to 16 percent. This will however only be relevant for services rendered in Islamabad as services rendered in provinces are subject to provincial sales tax.
—Abolition of fixed sales tax on SIM cards. However, this will not affect existing cases in litigation.
