Users to no longer pay service charges on pre-paid cellular scratch cards

Published July 15, 2019
Now, on a scratch card of Rs100, a user will receive a top-up of Rs88.9 instead of Rs76.94. — Reuters/File
Now, on a scratch card of Rs100, a user will receive a top-up of Rs88.9 instead of Rs76.94. — Reuters/File

Mobile phone service providers have started the implementation of a Supreme Court order to remove service/maintenance charges on pre-paid cellular scratch cards, Pakistan Telecommunication Authority (PTA) spokesperson Khurram Mehran told DawnNewsTV on Monday.

On a scratch card of Rs100, a user will now receive a top-up of Rs88.9 instead of Rs76.94.

Mehran said that in a earlier hearing this year, the apex court had told mobile phone service providers that they could apply a 12.5 per cent withholding tax. However, the court had told them to abolish the 10 pc administrative/service charges.

Last year, the then chief justice Nisar had taken a suo motu notice on public complaints that an unreasonable and high amount of tax/other charges were being deducted from the topping up balance through easy load and calling cards, besides taxing the calls.

Justice Nisar had asked whether deduction of Rs40 on every scratch card of Rs100 was not exploitation and observed that the matter involved public interest.

During one of the hearings, the court was told that the state had suffered a loss of about Rs90 billion since the issuance of the suspension order.

In April this year, the apex court restored deduction of withholding tax and sales tax on pre-paid cellular scratch cards by vacating the earlier suspension order.

The SC, however, stated that the telecom companies were not allowed to impose any service/maintenance charge.

The order read: "The order dated 11th June, 2018 did not record reasons nor did it determine that the imposition of the taxes was without jurisdiction. We are also not persuaded to hold that the taxes were imposed without requisite legislation or that the six statutes contravened the Constitution."

The order said the recovery of the taxes may therefore be resumed, adding: "However, the cellular telecom companies are not allowed to impose any service/maintenance charge thereon as they have elected not to impose these charges."

Before suspension, on each calling card of Rs100, withholding tax (income tax) of 12.5 per cent was deducted under Section 236 of the Income Tax Ordinance 2001 by the Federal Board of Revenue (FBR), whereas 17pc excise duty was charged from the users in Islamabad Capital Territory. The provinces were charging 19.5pc sales tax on services from the users. In addition, cellular companies were deducting 10pc for the services rendered by them.

Thus when a card of Rs100 was purchased or easy load top-up was procured, Rs25 was deducted immediately and the mobile phone subscriber received around Rs75 in his/her account. And when the subscriber made a call, the call charges plus FED or the provincial sales tax were deducted from the value of services consumed by the subscriber.

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