Supreme Court has initiated proceedings on its Suo Motu notice on mobile recharge card taxes on Tuesday this week. The Chief Justice of Pakistan had taken notice on this issue due to heavy tax deductions on mobile recharge card.
During the court proceedings, Attorney General of Pakistan, Ashtar Ausaf Ali informed the court that cellular companies deduct 19.5 percent as sales tax. Further break down of this tax indicates that 10 percent comprised service charges while 12.5 percent tax is deducted as withholding tax on mobile phone cards.
He also informed the court that these taxes are not applicable to services that are used by government and diplomats.
Chief Justice, Mian Saqib Nisar inquired the reasons for charging withholding tax as he believed that it was for penalizing the users who otherwise do not pay taxes applicable to them. He further emphasized that the double tax was illegal.
He also demanded to know why withholding tax is charged by Government from 140 million mobile services subscribers who were not eligible to pay taxes. Justice Umar Ata Bandial gave his remarks and said that it appears to be unlawful money to coax money out of people’s hands.
The Chief Justice also pondered over ways to refund telecom users who were not eligible to pay taxes but were charged withholding taxes. He further asked under which laws these taxes were charged. A lawyer present in the court informed the court that citizens of Islamabad are required to pay 17 percent sales tax while citizens of all the provinces have been paying 19 percent sales tax.
The Chief Justice also demanded that FBR and Provincial Governments issue a written reply to the court that identifies the law under which this sales tax was being applied. He also asked them to inform the court how these taxes are paid in other countries.