Slight Tax Reduction on Telecom Services in Budget 2014-15

In the proposed budget of 2014-15, Minister of Finance and Economic Affairs, Ishaq Dar, announced that Federal Excise Duty on telecom services has been reduced by 1 percent, from 19.5 percent to 18.5 percent.

Dar highlighted the fact that telecommunication sector has a huge impact on the economy of Pakistan and its services are being used on massive level, therefore, government finds it reasonable to reduce the tax burden on such services so that it could boost the sector for seeking bigger contribution.

According to the budget speech, “In order to simplify the tax regime, it has been decided to withdraw FED from those provinces which have imposed GST on Telecom Services. In areas where FED shall continue to be collected, the rate is proposed to be reduced from 19.5% to 18.5%. Furthermore, it has been decided to reduce the rate of Withholding Income Tax on telephone services from 15% to 14%”.

So… What Will I Get on a 100 Rs. Load?

After 1% reduction in withholding tax and 1% reduction in GST/FED, total taxes on telecom services will be 32.5%, reduced from earlier 34.5%. Following is the detail of taxes on Telecom services:

Withholding Tax 14% + FED/GST 18.5% = Total Taxes 32.5 %

That’s not all, every cellular company is charging around 12% services charges. Taking in account these charges, total amount deducted from cellular services is:

Taxes: 32.5% + Service Charges: 8% (for prepaid only) = Total Deduction 40.5%

In other words, you get an airtime usage of Rs. 59.5 out of a total balance of Rs. 100.

[Source: moremag.pk]
[Photo credit: LendingMemo.com]