Mobile phone recharge cards: SC restrains FBR, cellular companies from deducting WHT

The Supreme Court here Monday restrained Federal Board of Revenue (FBR) and cellular companies from deducting withholding tax and other charges from mobile phone recharge cards till further orders. The court also directed the FBR and the cellular companies to present within two weeks a plan to separate those mobile phone users not liable to pay tax from their tax collection system.

Chief Justice of Pakistan Mian Saqib Nisar heading a three-member bench observed that the deduction of such taxes was a compulsory appropriation and giving two days to the FBR and companies to implement the order. Chairman FBR Tariq Pasha and lawyers of cellular companies present in the court were unable to answer a query that under what law a person not liable to pay tax could be forced to pay tax.

The FBR chairman admitted that there was no mechanism to distinguish between the people liable and not liable to pay tax. “If you have no such mechanism then your policy to collect tax is sheer discriminatory in nature and the court has power to set aside the same,” Chief Justice, held. He further observed that the FBR should make a system under which deduction would not be made from those who did not come under the tax net.

 Briefing the convention about the method of tax collection on mobile phone cards by cellular companies, Nisar Khan said the FBR was collecting 14 percent withholding taxes on mobile phone cards.

A customer gets Rs.75.87 on the recharge of Rs.100 card after the deduction of all taxes. The tax ratio on mobile cards is different in all provinces as in Islamabad the total deduction is more than 26 rupees on a card of worth Rs.100.

FBR collected a total of Rs.43.3114 billion withholding tax from cellular companies during the FY 2015. While Rs. 1.2614 billion had been received from telecoms as excise duty.

Chief Justice lamented that these cellular companies had been fleecing the innocent consumers with impunity. The chief justice also criticized subsidized night call packages offered by the cellular companies to attract the youth. “These call packages have badly damaged the culture of our country,” th CJP observed. Chairman FBR and counsel of the companies sought time to device a policy on the matter and to remove shortcomings in the system.

However, the chief justice flatly turned down the request and observed that the court would not allow violation of the law anymore. “Take time as much as you need to make a system but we are abolishing these surcharges now,” CJP told them. Initially the court ordered the companies to stop deducting the taxes from the mobile phone cards immediately, however, gave them two days for the implementation of the order when their lawyers cited technicalities of system.

The spokespersons of National Database and Registration Authority (NADRA) confirmed PAC to provide required technical help for conducting the forensic audit of the cellular companies.