Federal Budget: Govt decides to impose 12.5% FED on Internet Services

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In the Finance Bill 2019-20, the government has proposed to impose 12.5 percent Federal Excise Duty (FED) on internet services and foreign satellite bandwidth service.

According to the budgetary documents, the government has suggested the withdrawal of exemption of FED on internet services and foreign satellite bandwidth service.

Currently, under the Third Schedule to the Federal Excise Act, 2005 the internet services exempt from payment of the FED, however, telecom services provided in Islamabad Capital Territory are subject to FED. Moreover, bandwidth services are also exempted from payment of FED.

In a bid to protect local services providers, the government aims to withdraw exemption on services provided by foreign satellites.

The government has proposed the withdrawal of 3% Value Addition Tax (VAT) on Mobile Phones. This 3% regime is also proposed to be transferred from the Sales Tax Special Procedures Rules, 2007, to the new Twelfth Schedule to the Act.

In order to encourage the local industry, the government has also proposed justification of tariff structure for SIM card manufacturing industry.

According to the Finance Bill, 2019 no levy has been imposed on imported mobile handsets valued under $100, whereas, mobile phones worth $100 to $200 will be imposed with tax rate Rs 400 (which is currently Rs 500).

Imported mobile phones worth $200 to $350 has been proposed to imposed with levy Rs. 1,200 (which is currently Rs 1500), Rs.2800 levy proposed on imported mobile phones worth $350 to $500 (currently is Rs 3500) and Rs. 5600 levy proposed on imported mobile phones worth above $500 (which is currently Rs 7000).

On Tuesday, Minister of State for Revenue Hammad Azhar unveiled the federal budget for the fiscal year 2019-20 estimated to be having an outlay of Rs6 trillion.

The budget outlay is Rs7,022 billion which is 30 per cent higher than last year.

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