Telecom sector welcomes 2.5 % GST Cut
Stakeholders hailed the slashing of 2.5 percent general sales tax (GST) on telephony services for the next financial year 2010-11, saying the customers, service-providing companies and the government will benefit as a result. The GST has been levelled to 17 percent across-the-board for all products and services, which is likely to affect other sectors but is good for the telecom sector, as it has been facing additional tax rate of 21 percent and 19.5 percent for the last two fiscal years.
Experts in the sector said the reduction in GST on telephony services will relax the affordability of customers to use all basic telephony and its related value-added services. Increase in services usage will benefit the fixed line, wireless and cellular phone companies and improve the government revenues’ further in this sector, they added. It has been observed that the high growth trend in the GST on telephony services has plunged in the telecom sector. The GST growth in telecom sector declined to barely 11 percent in 2008-09 when Rs 49 billion was collected at the rate of 21 percent.
Subsequently, the 1.5 percent slash in the budget 2009-10 reflected the 3.3 percent growth as reported in the first-half of the current fiscal year 2009-10. The GST collection at the rate of 19.5 percent witnessed a growth of 3.3 percent to Rs 167.2 billion as compared with Rs 161.8 billion revenue received in the same period of the proceeding fiscal year. Previously, the GST collection was seen at 44.5 percent and 36.3 percent growth in the last two fiscal years when GST stood at 15 percent.
Telenor Pakistan Chief Strategy Officer and VP Corporate Affairs Aamir Ibrahim said rationalisation of tax regime in the upcoming budget has potential benefits for all stakeholders, as the telecom sector is a major economic driver for Pakistan. On one hand this will reduce costs for the consumer resulting in higher usage, and on the other will help increase tax contribution because of wider net, he said.
According to the revised GST, on Rs 10-minute call, customers will pay Rs 1.7 on the account of GST, which was Rs 1.95. Similarly on Rs 25 SMS bundle, customers will be charged Rs 4.25 as GST, which was at Rs 4.85. Experts in the telecom sector said the minimal reduction of taxes on multiple services will be even good for customers as the services utility is extensive. Others taxes particularly on cellular phone sector have remained the same including Rs 250 SIM activation tax and 10 percent withholding tax at the consumers’ end.
(Source: DailyTimes)
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