Home »General News » Pakistan » Suspension of tax on cellphone top-ups: Centre, provinces question SC’s Jurisdiction
The federal and provincial governments questioned the Supreme Court's jurisdiction under the Article 184 (3) to suspend withholding tax and provincial sales tax on the amount loaded by the mobile phone users on cell phones.

On the charge of Rs 100 through easy load or scratch card, 42% is deducted which includes withholding income tax 12.5%, sales tax 19.5% and company services charges 10%. The person who loads the card has to pay 42% taxes and charges.

Attorney General of Pakistan Anwar Mansoor Khan supporting levy of Advance Tax on mobile users said that taxing by the government is not the fundamental right and that the Supreme Court took suo motu notice of it under Article 184(3) of the Constitution. He said income tax under Section 236 of Income Tax Ordinance, 2001 can be levied on the telephone users, it is legal and the apex court had given judgement on this in 2004 in TeleCard case, he added. The attorney general requested the bench to modify the order.

The additional advocate generals of all the four provinces and the Islamabad Capital Territory (ICT) supported the contention of the attorney general. They said that levy of sale/income tax was done away with by the apex court in an interim order dated 11-06-2018 without examining the provisions of Income Tax Ordinance 2001 and Sale Tax on Services Act.

The telecom companies did not challenge the Supreme Court order 11-06-2018. Syed Ali Raza, representing Mobilink and Ufone, informed that they have no issue regarding that order and since that time they have stopped collecting the 10% service charges.

A two-judge bench comprising Justice Qazi Faez Isa and Justice Ijaz ul Ahsan heard the appeals of the federal and the provincial governments against the Supreme Court order dated 11-06-18, wherein it had suspended the withholding income tax, sales tax and service charges on amount loaded by the mobile phone users on a prepaid cell phone card by the telecom companies.

Former Chief Justice Mian Saqib Nisar had passed the order on a complaint in social media regarding charging of unreasonable and high amount of tax/other charges on easy load and calling cards. It termed that withholding tax, sales tax and service charges are not validly and legally been imposed on amounts loaded by users of mobile phone devices for use of such devices to make and receive calls and use internet.

The court directed the additional attorney general and additional advocate generals of provinces to submit replies duly signed by the secretaries of finance and law on whether the matter can be proceeded in exercise of jurisdiction under 184(3) of Constitution. If the answer of question is in affirmative then whether Advance Tax under Section 236 of Income Tax Ordinance can be levied/recovered from non-tax payers.

Justice Qazi Faez inquired from the attorney general how the federal government could be barred from charging sale tax under Income Tax Ordinance. "Is there any restriction?" he further asked.

Justice Ijaz ul Ahsan said the government is collecting tax from people who are not in tax bracket. How Advance Tax under Section 236 of Income Tax Ordinance (ITO), 2001 could be collected from many people who use cell phones but are not tax filers. The AGP said they don't have data of such people.

Justice Ijaz said when a person applies for mobile connection, he gives substantial information to the companies along with the computerised national identity card (CNIC) number. So the companies and the government have enough information about such people.

Justice Qazi said, "Suppose I am a millionaire and make 2 to 3 calls a day, but a welder whose income is Rs 15,000 per month has to make 10 or more calls per day then he pays more Advance Tax than me."

Justice Ijaz said a person is liable to pay income tax under ITO if his income is of certain level. He said that income of salesman, watchman and barber does not come under the tax bracket, but the government was collecting income tax from them as well. The bench referred the matter to the Chief Justice to constitute a larger bench as the three-judge had passed the interim order.

Copyright Business Recorder, 2019


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