Description:

The Ministry of Finance and Revenue claims that a limited tax base and low revenue collection in an undocumented economy make withholding taxes, such as those on mobile recharging, necessary.

The government has clarified, nevertheless, that everyone, even those with incomes below the threshold for taxation, are eligible to file a return and request a refund of the taxes withheld.

According to official records, withholding tax is applied to mobile users, such as students, daily gamblers, Ehsas Program participants, etc., whose income is below the minimal threshold for submitting a tax return to be eligible for such a tax adjustment or refund

Telecommunications firms withhold 15% withholding tax from subscribers on each recharge. Withholding tax of Rs. 13.04 is deducted from a recharge of Rs. 100 (15 percent of Rs. 86.96 = Rs. 13.04), leaving the subscriber with access to the remaining Rs. 86.96.

In the Islamabad Capital Territory (ICT), a fee for FED @19.5 percent (Rs. 16.52 to on the value of Rs. 86.96) of the usage is imposed on telecommunication services. In sectors other than ICT, provincial law imposes a GST on telecommunication services.

According to paragraph (29) of section 2 of the Income Tax Ordinance, 2001 income include any amount subject to taxation under the Ordinance, the Finance Ministry has noted. According to the aforementioned clause, the amount that must be withheld is considered income. It is also mentioned that tax withholding, such as the kind on cellphone recharge, is necessary due to an undocumented economy"s tiny tax base and low revenue collection.

These are the main ways to increase the tax base and bring in money. The objective is to impose taxes on transactions when individuals working in the unregulated, formal sector communicate with one another in order to learn more about potential taxpayers and bring them into the tax net.

On specific costs or transactions that have a significant informational or mapping value, the collection of tax at sources is also mandated. Also changeable is the withholding tax on mobile recharging. Anyone, including those with less than the threshold for taxation, may request a refund of the tax withheld by submitting a return.

The Ministry has added that the taxation of mobile phone costs has undergone judicial review and has been upheld as legal by Pakistan"s Supreme Court.

Given the country"s need for revenue, a developing nation like Pakistan must withhold taxes. A straightforward return is used to claim the refundable tax that was deducted. Also worth mentioning is that the Supreme Court affirmed the constitutionality of the withholding tax on mobile recharges in its ruling.

The Income Tax Ordinance, 2001 does not contain any provisions that would allow someone whose income is below the minimal threshold for filing a tax return to acquire a certificate. Only people whose income is exempt under one or more provisions of the Income Tax Ordinance, 2001 are eligible for an exemption certificate.

The Ministry added that, in accordance with the policy, this tax is neither the minimum nor the last tax. A straightforward return must be filed in order to claim the refundable tax that was deducted. By submitting a return, anyone—including those with incomes below the taxable threshold—can request a refund of taxes already paid.