LAHORE, June 20: With the imposition of 21 per cent federal excise duty (FED) on telecom services in the 2008-09 budget, cell phone users will have to pay an additional amount of at least Rs15 billion during the next fiscal year.
The current taxation rate on the cellular services is 15 per cent, which is already one of the highest in the region but despite that the telecom sector growth remained quite phenomenal in the country, touching the mark of 85 million cell phone users.
“The FED or GST on all other industries has been increased by one per cent but for the telecom services the hike is six per cent,” said an industry analyst. In his view, the tax impact should have been on the cellular operators and not the consumers.
The industry had generated Rs253 billion in 2006-07 fiscal year and is expected to generate more during the current year ending on June 30 because of the increase in cell phone users.
The analyst said the cellular industry had a mobile penetration of 52 per cent and further growth was expected. “Until 2001 the service was restricted to the well-offs but today every segment of society was availing the facility at affordable rates,” he said and added the increase in FED would be directly borne by the consumers as the cellular companies would increase the call rates accordingly.
Owing to stiff competition among the cellular operators in the country, lower tariff has been introduced to attract a maximum number of subscribers. However, after the imposition of new tax the tariff will register an increase.
The analyst said that substantial increase in the tax would also have an adverse impact on the growth pattern of the industry. He said the telecom industry had contributed more than Rs100 billion to the national exchequer in different heads in 2006-07 and the pattern showed that in the current fiscal year the figure could go well above that.
Besides six per cent increase in FED on telecom sector, Rs500 tax on a cell phone handset has also been imposed in addition to that of activation charges.
