Cellphone service providers and the Federal Board of Revenue (FBR) will not charge any tax or charges on mobile phone top-up cards for a period of 15 days, officials said on Wednesday.
Starting 12am on Thursday, cellphone users will receive 100 per cent credit balance on a recharge of any amount, FBR officials told DawnNewsTV.
The development comes two days after the Supreme Court restrained FBR and cellular companies from deducting withholding tax and other charges on prepaid cards till further orders.
Giving two days to the FBR and the cellular companies to implement the order, a three-judge SC bench headed by Chief Justice Mian Saqib Nisar had observed that the deduction of such taxes was a compulsory appropriation. He had lamented that the cellular companies were fleecing innocent consumers with impunity.
The temporary relief for customers will last 15 days, following which a mechanism will be devised to collect tax on mobile phone top-up cards.
Although no official announcement was made of the tax suspension by FBR, Telenor, one of the major cellphone companies in the country, informed its customers of the development, saying: "From 14 June 2018, there will be no tax deduction on your recharge."
"Every recharge will result in a complete transfer of balance to your account!" the company wrote in a news alert on its website.
The apex court had directed the FBR and the cellular companies to present within two weeks a plan to separate those mobile phone users who were not liable to pay tax from their tax collection system.
Chief Justice Nisar had taken a suo motu notice of the matter on public complaints that an unreasonable and high amount of tax/other charges were being deducted from the balance purchased through easy load and calling cards, besides taxing the calls.
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.