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The Supreme Court of Pakistan (SC) had ordered on Monday to suspend deduction of taxes on prepaid mobile phone cards.
The Chief Justice of Pakistan, Justice Mian Saqib Nisar, was heading a three member bench in suo motu case regarding an increase in taxes on prepaid scratch cards at Supreme Court's Lahore Registry.Chief Justice Saqib Nisar ordered the suspension of increase in taxes and gave authorities two days to implement court orders. He further directed authorities to draft a comprehensive policy regarding deduction of taxes on mobile phone usage.
Justice Saqib Nisar said, "Taxes should be taken from users whose mobile phone usage is above the set limit."
"Service providers and Federal Bureau of Revenue (FBR) charge taxes on prepaid scratch cards and are looting people. the bench Judges remarked.
"How are taxes being charged from those who do not fall in the tax net?" the bench asked the FBR chairman.
The bench further stated, "It is illegal that Rs 64.38 are charged as taxes on a Rs 100 prepaid scratch card."
The FBR, had earlier explained the SC that every time a consumer loads a Rs 100 mobile card, 12.5% of the total amount gets deducted as adjustable withholding tax, while 10% of the card goes to the telecom company as service charges.
With the telecom company taking its cut, the 19.5% sales tax also kicks in. However, it is applied only to the telecom company's 10pc rather than the entire Rs100 card.
At this point, the consumer is left with Rs76.94 of which the government charges 19.5% sales tax (Rs 15) to the consumer for making calls and sending SMS.
In the end, as per the FBR calculation, the net amount left with the consumer for his actual consumption on a Rs 100 charge is Rs 61.93.
