Cellular Operators Demand Tax Cuts

Cellular operators have demanded of the government to do away with some forms of taxes that apply to them. Among them are the elimination of Withholding Tax (WH), rationalization of the Federal Excise Duty (FED)/General Sales Tax (GST), eliminating the advance Income Tax on the auction price of spectrum (4G), and the granting of industrial status to the telecom sector by the Federal Board of Revenue (FBR). All these demands are geared towards the upcoming 2017-18 budget.

Given that the rollout of the network associated with the auction will require significant Capex besides the importing of equipment, the cellular operators have written to the Pakistan Telecommunication Authority (PTA) requesting for the elimination of the import tax currently being levied.

Besides that, the firms also requested that shipments between provinces be given free passage. This is because the Customs Intelligence in Punjab inspects every shipment. The aim of these requests for investment incentives was aimed at enabling the firms to roll out NGMS services and others.

The Pakistan Telecommunication Authority (PTA) will need to work together with the other major stakeholders in the industry including the FBR and the Auction Advisory Committee to see to the issues. These issues carry a huge impact on the cellular industry hence will need to be deliberated upon with all the affected parties and in view of the Finance Bill, the fiscal year 2017-18.

The complete list of the requests made by the time companies has:

• Rationalizing of the FED/GST
• Eliminating of the WHT
• The granting of Industrial status to the Telecom sector by the FBR
• Eliminating of the Advance Income Tax on Auction price of spectrum

Among the hardships noted by the telecom operators was the failure of the Federal Board of Revenue (FBR) in implementing the Ministry of Industries and Production’s classification of the cellular operators as an industry in their own right. Another hardship was the failure of the Federal Board of Revenue to recognize the Ministry of Information Technology (“MoIT”)’s classification of the cellular operators as an industry. Although these classifications were done back in 2014, it has not been implemented.