Telecom at the top of the pile

The telecom sector has become a largest utility services consumed by customers in the first half of current financial year 2011-12, in different parts of the country they paid Rs 39.828 billion on the account of taxes on telephony services.
According to the FBR statistics, it collected Rs 24.058 billion GST/FED from customers of different telephony services (Cell phone, landline, wireless) in July-December 2011. Telecom service is having biggest subscriber’s base in the country with more than 120 million subscribers on various operators using different technology. As against, customers of different utilities such as electricity and natural gas, which can be estimated to be very low comparatively.
On the top of all, the rate of FED collected on telephony services in the mode of GST, is the highest among all the sectors, standing at 19.5 percent compared with 16 percent of different sectors and utility services. Telecom sector is the major spinner after petroleum products contributing to massive revenues under GST. It share constitutes 16.7 percent in overall GST collection as reported by FBR.
Previously, the sector generated Rs 23.429 billion under GST, showing growth of 14.2 percent revenues of tax authorities on the increase of services utility and number of subscribers on different networks.
Remember the FED/GST deducted on every call a subscriber makes; or over sending SMS/MMS; subscription of various call packages, SMS bundle offers, and GPRS. In addition to it applies on balance inquiry and balance loan as well.
FBR however is not happy with this collection as it expressed dismay over its low growth.The report said that “the collection from telecom, second major source of sales tax domestic, has registered a low growth of 2.7%. One reason of low growth is around 2% increase in the input adjustment.” The tax is slapped and deducted from the customers. Now it is tax evasion of telecom operators or inefficiencies of tax authorities to receive it properly, the customers ultimately pay its heavy contribution of using services. Besides, FBR collected Rs 15.77 billion under Withholding Tax (WHT) in first half of the current financial year 2011-12 as against Rs 13.264 billion taxes collected under same head in the corresponding period of pervious financial year. The WHT collection from telecom sector showed a growth of 19 percent from previous year whereas the sector share was remained 8 percent and it is fourth largest contributor of overall WHT generation. The WHT at the rate of 10 percent is deducted at the moment you recharge your balance if you are a prepaid customer. Whereas, the postpaid customers of different services have to pay 10 percent of the amount bill excluding GST/FED and operators’ charges. Overall, last year Rs 36.693 billion collection in the first half of 2010-11, hence Rs 3.135 (8.5) percent more tax collected in the present financial year.