Blog: FBR Empowered to Conduct Sale Tax Audit of Telecom Companies

The Federal Board of Revenue (FBR) would be empowered to conduct sales tax audit of telecommunication companies under the reformed GST even after levy of sales tax on such services by the provinces. Tax experts told Business Recorder here on Thursday that the Record Note on the implementation of the reformed GST has clearly specified that FBR would be the sole authority for carrying out sales tax audit of the telecom companies.

According to the Record Note on the implementation of the reformed GST, the proceeds of GST on telecom services shall be credited directly by telecom companies to the provinces on the basis of revenue generated on the origin of service in each province. For purposes of further clarification, GST on telecommunication services (and such other services whose origin is clearly identifiable but require input/output adjustments and refunds) shall be levied under provincial legislation in a single return and a single audit mode be managed by FBR with returns and audit data shared by the provinces, it added.

Experts were of the view that the FBR has to abolish telecom services from Table-II of the First Schedule of the Federal Excise Act to ensure collection of the levy by the provinces.

The excise duty may be abolished on the telecommunication sector under the RGST regime. The powers of the FBR to collect federal excise duty (FED) on excisable goods would remain intact after introduction of the RGST. However, sales tax on telecommunication services shall be credited directly by telecom companies to the provinces. This means that the amount collected would be directly deposited into the provincial head of sales tax.

The excisable goods specified in the Table-I of the First Schedule of the Federal Excise Act are liable to FED like travel and carriage of goods by air, rail and sea to be charged by the FBR. However, the telecommunication services mentioned in the Table-II of the First Schedule of the Federal Excise Act needs to be abolished for collection of sales tax on the same by Sindh, experts said. Presently, the Table-II of the First Schedule of the Federal Excise Act covers excisable services including advertisement on closed circuit T.V; advertisements on cable T.V. network; advertisements in news papers

and periodicals (excluding and Classified advertisements) of hoarding boards, poles signs and sign boards; facilities for travel including services provided or rendered in respect of travel by air of passenger within the territorial jurisdiction of Pakistan, services provided or rendered in respect of travel by air of passengers embarking on international journey to or from Pakistan, Passengers embarking or from SAARC region, UAE (Middle East), Saudi Arabia, Africa, Afghanistan, passengers embarking to or from Europe, Far East, China, USA, Canada, Australia, South America, others; inland carriage of goods by air; shipping agents; telecommunication services including telephone services, fixed line voice telephone services, wireless telephone, cellular telephone, wireless local loop telephone, video telephone, payphone card, pre-paid calling cards, voice mail service, messaging service, short message service (SMS), multimedia message service (MMS), bandwidth services used for voice and video telecommunication vices, fibre-optic based, co-axial cable based, microwave based, satellite based, telegraph, telex, telefax, store and forward fax services, audiotext services, teletext services, trunk radio services, paging services, voice paging services, radio paging services, vehicle tracking services, burglar alarm services, services provided or rendered in respect of insurance to a policy holder by an insurer, including a re-insurer [in case where direct insurance service has been provided] including goods insurance, fire insurance, theft insurance, marine insurance, other insurance; services provided by banking companies or non-banking financial companies; franchise services, services provided by property developers or promoters for development of purchased or leased land for conversion into residential or commercial plots, construction of residential or commercial units, services provided or rendered by stock brokers, services provided or rendered by port and terminal operators in relation to imports excluding stevedoring services.