KARACHI: The tax authorities have suspended all taxes levied on prepaid scratch cards following directives from the Supreme Court.
After the suspension, no tax would be reduced when a prepaid scratch card is reloaded from midnight Thursday and consumers will get 100% credit for the next 15 days.
The Supreme Court ordered the Federal Board Revenue (FBR) to report on the income impact of the suspension of tax collection after the 15-day period.
Due to the suspension of taxes on prepaid mobile phone cards, cellular service providers will not receive Rs 1.45 billion in service charges.
On the other hand, FBR will lose by getting 2 billion rupees while the provinces will not receive 2.91 billion rupees in sales taxes during the 15 day suspension.
FBR sources said 120 billion rupees in taxes were levied on downloading prepaid cards into mobile phones. Of the amount, FBR gets 12.5 percent of the share while each province receives 19.5 percent in terms of sales tax.
On Monday, the Supreme Court ordered a suspension of the tax deduction on prepaid scratch cards.
Pakistan’s Chief Justice Judge Saqib Nisar ordered the suspension as he headed a three-judge bench examining a suo motu case regarding an increase in fees on prepaid cards at the registry in Lahore, the highest court .
“Taxes should be levied on users whose mobile phone use is greater than the set limit,” Judge Nisar noted during the hearing.
He further called on the authorities to draft a comprehensive policy regarding the deduction of taxes on the use of mobile phones.
Previously, customers received Rs64.28 on top-up of the Rs100 prepaid card, after deducting federal excise duty, income tax, and sales tax.
According to sources, cellular service providers receive 35 billion rupees per year by charging 10% tax on every prepaid card download into mobile phones.