According to documents available with Business Recorder, Information Technology Board has recommended that the revision may be made on following terms: (a) data services to be exempted from sales tax on fixed broadband internet for usage under Rs 2500 per month and for up to 8 megabits per second (Mbps) connections; (b) data services are to be taxed at the existing rate of 19.5 percent sales tax on fixed broadband internet for usage above Rs 2500 per month and for connections above 8 Mbps connections; and (c) data services to be exempted of sales tax on mobile broadband internet for usage under Rs 2500 per month.
Managing Director (MD) Information Technology Board Dr Shahbaz Khan told Business Recorder that to facilitate information technology businesses and economic growth in the province, KP government had started working for revising the 19.5 per cent sales tax on broadband internet. The final plan has been submitted for approval to the Chief Minister Khyber Pakhtunkhwa for revising the sales tax on internet. After the approval of the Chief Minister 19.5 percent sale tax on Internet would be revised, he added.
MD further said that the proposed revision of tax on internet would help the small businesses to flourish in the province. Further, the move would help in encouraging the cellular operators in roll-out of 3G and 4G services in the province. He said that recommendations were prepared in consultation with all stakeholders including Pakistan Telecommunication Authority (PTA).
The Punjab government has already withdrawn 19.5 per cent sales tax on mobile and wireless internet, fixed line internet and other forms of internet, while Sindh government has reduced it from 19.5 percent to 18.5 percent. KP imposed 19.5 per cent taxes on all sorts of Internet (DSL, EVO, 3G, 4G, WiMAX) in 2014.
Broadband internet penetrations will not only impact positively on academic ventures of the KP government but it will also help flourish the high-tech start-up ecosystem involving young educated minds from the province, telecom sector experts added.
All the stakeholders including general public, PTA, telecom operators etc were demanding since long for removing tax on broadband internet and data services on mobile phone to give relief to masses.
The mobile operators had written a joint letter to CM Khyber Pakhtunkhwa earlier in June 2015 urging the provincial government to waive off general sales tax (GST) on internet and data services which is slowing down the penetration of 3G and 4G technologies throughout the province.
Cellular mobile operators and PTCL had jointly stated: "Taxation on telecom sector in Pakistan is currently one of the highest in the world. We believe that imposing additional taxes in the form of GST on data services will not only hamper economic growth in the country but will also adversely impact internet penetration. We strongly believe that it will slow down the growth of 3G and 4G in the country."
According to experts tax rate on telecom services in Pakistan is around 40 percent which is one of the highest effective tax rates in the world. In addition to taxes, 19.5 per cent GST on mobile broadband and data services simply adds to the burden on consumers.
Copyright Business Recorder, 2017