The cellular companies have started collecting increased withholding tax from cellular customers with effect from January 16, 2022.

The government has increased the tax on mobile recharge and consumers will be charged an additional 15 percent withholding tax on each recharge.

In this regard, text messages are being sent to consumers by various telecom companies informing them about the tax hike.

Sources said that an additional withholding tax of Rs9.3 is imposed on recharge of every card costing Rs100. The telecom companies have announced to levy additional tax on balance recharge and now on recharge of balance Rs100, the consumers will get a balance of Rs86.9.

The government had earlier proposed increase of five percent in the withholding tax (WHT) on telecom services and the standard rate of 17 percent sales tax on import of computers and accessories in the mini-budget.

After the passage from the parliament the finance supplementary bill, which was later signed by the president into law, it has come into effect.

The government had brought down the WHT rate from 12.5 percent to 10 percent in the budget for 2021-22 and made a commitment that it would be further brought down to eight percent in the next budget for 2022-23.

However, the government reversed its decision to raise revenue, with a five-percentage-point hike in advance tax on telecom sector. The WHT was earlier collected at a rate of 10 percent from all telecom users, regardless of their taxable obligations. Majority of the country’s population has non-taxable incomes, these individuals are required to pay the WHT, which they will never be able to recover.

The Ministry of Information Technology and Telecommunication had opposed the move to increase taxes on the telecom sector.

This report was first published in Business Recorder on Jan 19, 2022.