Govt may cut SIM activation tax by 40pca

[LahoreEstate]

Friday, June 05, 2009
By Jawwad Rizvi

LAHORE: The federal government is likely to reduce SIM activation tax by 40 per cent to Rs300 from Rs500. However, no reduction would be made in general sales tax as the government has no other way of easy collection of GST for revenue generation, The News has learnt.

All stakeholders of the telecom industry had proposed to the government to withdraw SIM activation tax in upcoming budget in order to encourage more investment in the high-growth industry. However, the government has decided to reduce the activation tax and may waive it completely later once revenues from other sectors come.

Sources in the finance ministry revealed that initially the government was considering completely removing the SIM activation tax and reducing the GST from 21 per cent to 18 per cent. However, it was prevented by the economic recession and the Supreme Court’s pressure to cut petroleum product prices, which may make it difficult for the government to achieve its revenue target.

Industry stakeholders say that high tax rates had badly affected the usage of services, leading to a sharp decline in the revenue of the cellular industry. It has also affected revenue contribution of the cellular industry to the national exchequer.

The contribution of telecom sector to the national exchequer declined by 18.7 per cent in the first half year of 2008-09 as compared to 24.6 per cent share of GST, recorded in the same period of previous fiscal year.

A Pakistan Telecommunication Authority (PTA) report also showed that the revenue of telecom sector had sharply declined in the first two quarters of fiscal year 2008-09 as compared to the previous fiscal year. In April-June 2008, the Federal Board of Revenue (FBR) received Rs12.4 billion from the telecom sector at the rate of 15 per cent GST. Whereas, its receipts in the period of July-Sept and Oct-Dec 2008 were recorded at Rs11.4 billion and Rs11.7 billion at 21 per cent GST rate, depicting contraction of eight and six per cent in indirect taxes, respectively. The cellular phone companies contributed a lion’s share to the overall GST amount of telecom sector.

Sources in government quarters of telecom sector revealed that the main objective of reduction in SIM activation tax is to provide relief for the operators in order to encourage them for further direct investment. It had also proposed to reduce the GST in order to increase the use of cellular services, but this proposal was rejected due to the economic crunch, they added.

http://www.thenews.com.pk/daily_detail.asp?id=181326