The Supreme Court on Wednesday restored all the taxes charged by cellular service providers on mobile phone top-up cards. A three-judge bench, headed by Chief Justice Asif Saeed Khan Khosa, after hearing the arguments reserved the judgment which was announced after half-an-hour. The reason will be recorded later soon.. All interim tax suspension orders are withdrawn.
On the charge of Rs 100 easy load or scratch card, 40 percent of the amount is deducted, which includes withholding income tax, sales tax, and company service charges. The person who loads the card had to pay 40 %. Since the suspension of taxes, consumers on Rs 100 charge used to get Rs 100 balance, but now cellular consumers won’t get full balance for their recharges.
Pursuant to Article 184(3), the Attorney General of Pakistan and the Advocate General of all four provinces and the Islamabad Capital Territory (ICT) opposed the Supreme Court’s jurisdiction to suspend withholding tax and the provincial sales tax on the amount charged by mobile phone users on cell phones.
During the hearing, the court was also told that the Punjab government earned approximately Rs 120 billion annually through such deductions, around Rs 90 billion from the Sindh government, Rs 36 billion from the Balochistan government, and Rs 55 billion from the Khyber Pakhtunkhwa (KP) excluding FATA areas.
The federation supported the levy of Advance Tax on mobile users and said that government taxation is not the fundamental right, and the Supreme Court’s Suo motu notice does not fall under Article 184(3) of the Constitution. Their claim was that income tax can be levied on telephone users under Section 236 of the Income Tax Ordinance, 2001, it is legal and the apex court had given judgment in the telecard case in 2004, it added.
The provinces ‘ position was that the apex court abolished the sale/income tax levy in an interim order dated 11-06-2018 without examining the provisions of the Income Tax Ordinance 2001 and the Sale Tax on Services Act.
Justice Qazi Faez questioned whether in tax matters suo moto jurisdiction could be invoked. “How could the federal government be prevented from charging sales tax under the Income Tax Ordinance? Is there any restriction?” he further asked.
Justice Ijaz-ul-Ahsan said the government is collecting taxes from people who are not in the tax bracket. “How could Advance Tax under Section 236 of the Income Tax Ordinance (ITO), 2001 be collected from many people who use cell phones but are not tax filers?”
Barrister Syed Ali Zafar, representing the Punjab Revenue Authority (PRA), argued that the Supreme Court had passed interim orders suspending the sales tax charged on telecommunications services on calling cards. He submitted that so far, as a result, Punjab alone could not recover more than Rs 27 billion.
When it comes to tax matters, the counsel citing various judgments contended that the imposition of any kind of tax or fee is a sovereign power of Parliament and provincial assemblies and one of their core duties.
He said that if a tax is challenged then the appropriate procedure under the Constitution is that the case should first be brought before the appropriate high court by an aggrieved party pursuant to Article 199 of the Constitution and that the Supreme Court should only examine the validity of tax laws in the exercise of appellate jurisdiction. In this way, the court will have the benefit of the decisions of the high court as well.
As regards the imposition of sales tax on the services under the Punjab Sales Tax Act, 2012, he submitted that the tax was being levied in accordance with and under the provisions of valid law and neither was anyone aggrieved by it nor had it been challenged is contrary to any of the fundamental rights enshrined in the Constitution and, hence, the suo moto proceedings undertaken by the court should be disposed of. In this way, the court will also benefit from the high court’s decisions.