In the federal budget for fiscal year 2021-22, the government designated the telecom sector as an industrial sector.
Finance Minister Shaukat Tarin, who unveiled the budget measures on Friday, stated that the government was committed to offering all available services to law-abiding taxpayers in order to minimise the burden on the ordinary man.
“It is proposed that the telecom industry be given the status of an industrial undertaking in order to extend the telecommunication network and stimulate investment,” Tarin stated during his speech.
The elevation to industry status will make it easier for the sector to obtain bank financing for new projects. The telecom industry will also be able to attract new investment as a result of this.
“Several new steps have been announced to assist telecom and IT exports; and recognising telecom as an industrial enterprise would bring it on line with other sectors of the economy,” said Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI).
“However, certain new levies on the use of telecom facilities will harm telecom enterprises, and the government should reconsider,” he added.
In addition, the finance minister proposed tax breaks for IT and IT-based services.
According to the budget, under the Tax on Services Ordinance 2001, IT and IT-based services would be supplied with a zero-rated facility by modifying the tax system.
According to Tarin, the federal excise duty on telecommunications was proposed to be reduced from 70% to 16% in order to bring relief and business opportunities to the public.
In remarks to The Express Tribune, Topline Securities ICT expert Umair Naseer stated that though zero-rating procedures had been removed from the Income Tax Ordinance, they had been reintroduced for the telecom sector, which would be advantageous.
IT services, cloud computing, and IT equipment were all exempted in the same way.
However, the federal minister regretted that one of the government’s most onerous objectives was to remove the informal sector and promote the digital economy. “To boost the digital economy, we are adopting a number of tax policies and incentives,” he continued.
The withholding tax on mobile services is currently 12.5 percent. “In order to ease the burden on the ordinary man, it is proposed that this rate be decreased to 10% for the coming fiscal year, and then gradually reduced to 8%.”
Aamir Hafeez Ibrahim, the CEO of Jazz, took to Twitter to praise the government for providing much-needed assistance in the budget.
He hoped, however, that the regressive tax plans would not be enacted, because “any additional levy on the internet is damaging to Pakistan’s digital journey.”
After the federal budget was announced, Energy Minister Hammad Azhar explained on his official Twitter account that the prime minister and cabinet had not approved the federal excise fee on internet data use.
He stated, “It will not be included in the final copy of the Finance Bill that will be presented to parliament for approval.”
Following a barrage of criticism, the clarification was issued.
Despite the fact that the budget was tax-light and business-friendly, internet taxes were hiked, according to Alpha Beta Core CEO Khurram Schehzad.
“The internet is a commodity. We are now learning and communicating more than ever before through the internet,” he said, noting that Pakistan was previously ranked 16th, while India topped the list for the cost of a 1GB internet connection.
Regulatory duties were implemented to protect local industries so that imports might be substituted in the country, such as the mobile phone and tyre manufacturing industries, according to the federal minister during the budget.
“Regulatory duty has been revised on numerous things while it has been abolished on others,” he says.
According to the minister, Pakistan is the world’s seventh largest mobile phone user market, and a significant amount of foreign cash is spent on mobile phone imports to meet annual demand. Pakistan’s mobile phone sector, on the other hand, has begun manufacturing following the release of the mobile phone device policy.
“It won’t be long until Pakistan starts exporting cell phones,” the federal minister said.
While the local mobile phone sector is still in its infancy, Tarin claimed that the regulatory tariff on imports of mobile phones has been raised to encourage local import replacements and attract international investment.
According to Aleem of OICCI, the government has also created Special Technology Zones, which is a positive move toward improving the country’s digital landscape.
Supreme Court Advocate Zaheer Minhas echoed the sentiments, saying that the administration has also stated that it will boost the use of technology in the tax system, which is a great step.