Despite the assurance of Punjab Finance Minister Dr Ayesha Ghaus Pasha, the Punjab government is yet to issue the formal notification for withdrawal of General Sales Tax (GST) on internet usage.
About a week ago, Punjab Chief Minister Shahbaz Sharif had said that the government was not going to levy the tax on internet usage and a notification in that regard would be issued in a day or two by the Punjab Finance Department.
However, an official of a telecom company told Pakistan Today, “We are still waiting for the notification to withdraw the 19.5 per cent GST on internet usage as the chief minister promised last week.”
Earlier on June 12, the Punjab finance minister had announced to withdraw the GST on internet to promote internet culture in the province.
Commenting on the issue, a Punjab finance department official said that the notification would likely be issued by next week. “There is no legal problem. After the announcement of Punjab government, we have to revoke the earlier notification,” he added.
In this connection, a mobile company had started deduction of 19.5 per cent internet data charges on its data service from July 28 while another company has announced to deduct this tax from August 4. A Norway-based telecom operator had already given a date for the deduction of this tax from August 7. Two companies are silent over this issue.
The internet tax has increased the charges of various 4G, 3G and 2.5G services in Pakistan which would increase the additional burden of Rs 1.95 to Rs 195 on various packages ranging from Rs 10 to Rs 1,000 varying from daily to monthly period.
It would not be justified if the new tax is imposed on the customers belonging to Islamabad, Gilgit-Baltistan, Azad Kashmir, Balochistan and FATA, as these regions are being administered by the federal government for revenue collection, which did not introduce any tax on internet services.
The imposition of tax on internet was introduced by the Sindh government for the financial year 2014-15 on above usage of Rs 1,500 at 19.5 per cent GST whereas the KP government also replicated the same tax. However, a leading broadband and telecom operator filed cases in high courts and got stay orders in these two provinces.
The telecom operators have been submitting taxes to the court from their own pockets rather than passing it on to the consumers. It is because of the fact that the operators believe the tax on data services and internet would hamper growth on the utility of newly-launched 3G/4G services though it is not possible for companies to bear the burden for a longer time.
Pakistan is the second country in the world after Bhutan that taxed data services but its tax rate is much higher compared with 5 per cent levied by the Bhutanese government, the mobile company source said.
The country has secured first position in the world’s ranking of highest tax regime with 53 per cent of the overall taxes including 19.5 per cent on call and voice services, 14 per cent withholding tax (WHT) and now 19.5 per cent additional service tax that was levied by the Punjab government last month on the above 2 Mbs speed (or Rs 1,500 monthly connection charges), hence technically imposing charges on 3G/4G/LTE of the telecom services.
Pakistan has left behind Turkey with less than 50 per cent tax followed by Gabon with 40 per cent and Tanzania with 34 per cent. The data services or mobile internet have been exempted throughout the world from the taxes because of its unparallel benefits to the masses and its ripple effects on social developments and economic growth, sources said.
The new tax is likely to affect the consumption of internet broadband, which is being used by 10 per cent (13 million customers) of the total subscriber base of 130 million in more than 100 cities.
According to a telecom industry official, the Punjab government will collect almost Rs 3.5 billion to 4 billion revenue through this tax but it might affect the growth of data users.
