The Supreme Court (SC) on Monday suspended the deduction of taxes imposed on the top-up of prepaid cards by cellphone service providers and the Federal Board of Revenue (FBR), giving both institutions two days to act on the orders.

A three-judge bench comprising Chief Justice of Pakistan Mian Saqib Nisar, Justice Ijazul Ahsan and Justice Umar Ata Bandial, was hearing the case at the SC Lahore registry.

The court, when it was told earlier that for every cellular charge, 5.5 per cent was deducted as a withholding tax, 19pc as sales tax and another 10pc as services charges, had described the deductions as exploitative and illegal.

The court observed today that ordinary cellphone users were "being looted" due to the taxation measures in place on prepaid cards.

"How can you ask a pushcart vendor to pay taxes?" Justice Ahsan asked. "If someone doesn't fall into the tax net, how can taxes be imposed on them?"

"It is unlawful that on a Rs100 prepaid card, only Rs64.38 is acquired," Justice Ahsan said.

The chief justice said that only people whose cellphone usage crosses certain limits should be taxed.

The top judge said that a comprehensive policy should be formulated on taxes imposed on prepaid cellphone cards.

Breakdown of deductions made to 100-rupee calling card

The FBR,via an illustration, had earlier explained to the SC that every time a consumer loads a Rs100 mobile card, 12.5pc of the total amount gets deducted as adjustable withholding tax, while 10pc of the whole goes to the telecom company as service charges.

With the telecom company taking its cut, the 19.5pc 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 19.5pc 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 Rs100 charge is Rs61.93.

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