Government withdraws FED exemption on internet, broadband services

Though the federal government is slamming the Sindh provincial government for imposition of sales tax on internet and broadband services, it has itself withdrawn exemption of Federal Excise Duty (FED) on internet and foreign satellite bandwidth services in the Finance Bill 2019-20. Federal Minister for Information Technology and Telecommunication Dr Khalid Maqbool Siddiqui through a statement condemned the imposition of sales tax on internet and broadband services by the government of Sindh.
Terming the decision as victimisation of youth, the federal minister for IT said that the youth is a major segment of Pakistani society and the decision of Sindh government will impact the youth, especially students. He asked the Sindh government to withdraw its decision of imposition of 19.5 percent sales tax on internet and broadband services.
A senior Sindh Revenue Board (SRB) official told Business Recorder that they are just following the suit as other three provinces including Punjab and KP, where the PTI is in power, have already imposed taxes on internet.
According to the SRB statement, "Sindh sales tax on internet and broadband services of up to 2 mbps speed and of up to 4 mbps speed, the charges for which did not exceed Rs 1,500 per month and Rs 2,500 per month, respectively, were exempted until June 30, 2019. Other internet and broadband services were already paying SST at 19.5% and there was no change in the Sindh Budget-2019.
"The said exemption has been withdrawn with effect from July 1, 2019. Now (effective 01-07-2019), all internet and broadband services, irrespective of speed or charges, will pay Sindh''''s Sales Tax at the statutory rate of 19.5%.
"It is pertinent to mention here that the exemption of FED on internet and broadband services has also been withdrawn by the federal government w.e.f. 01-07-2019. Therefore in all areas of Pakistan outside provinces (eg. ICT, FATA, PATA & Gilgit-Baltistan and also AJ&K which has adapted the FE Act, 2005), FED will be chargeable at 17% on all internet and broadband services."
In Punjab, Khyber Pakhtunkhwa and Balochistan, provincial sales tax on internet and broadband services was already payable at 19.5% (irrespective of the mbps speed and irrespective of the amount charged) and the said levy continues unchanged in those provinces too.
Soon after the Sindh provincial government''''s decision of imposition of sales tax on internet services, Maqbool Siddiqui sprang into action and through a statement condemned the act of the government of Sindh. But the federal government itself has withdrawn exemption of FED on internet services and foreign satellite bandwidth services in the Finance Bill 2019-20.
The telecom services provided in the Islamabad Capital Territory are subject to FED under the Federal Excise Act, 2005. However, internet services were exempted from the payment of FED under third schedule to the Federal Excise Act, 2005 before July 1, 2019. Further, bandwidth services were also exempted from the payment of FED.