Telecom facilities through internet exempted from FED, rules SC

ISLAMABAD: The Supreme Court has ruled that all telecommunication facilities availed through internet are exempted from Federal Excise Duty (FDE) irrespective of their nature.

A three-member bench of the apex court headed by Justice Maqbool Baqir and comprising Justice Muneeb Akhtar and Justice Qazi Muhammad Amin Ahmed dismissed the petition filed by Commissioner Inland Revenue, Islamabad against the judgment of the Islamabad High Court (IHC) upholding the exemption of Internet services from the FDE. The bench while announcing the judgment held that the M/S Wi-Tribe Pakistan Limited, which holds a wireless local loop licence, was issued a show cause notice for non-payment of FDE on account of service falling under the scope of telecommunication services rendered for the priors from January 2001 to December 2012.

The company challenged it before the Appellate Tribunal Inland Revenue which held that since Internet services are exempted from the FDE, the voice content transmitted through internet also enjoys such exemption.

The IHC upheld the tribunal’s decision through the impugned judgment. However, the Inland Revenue commissioner challenged the IHC decision before the Supreme Court.

The five-page judgment, written by Justice Maqbool Baqir, while upholding the IHC verdict ruled that the respondent M/S Wi-Tribe Pakistan Limited at least in the present context, are internet service provider(ISP), and charges for such service only.

The court observed that though a customer may utilise internet facility for various different purposes such as browsing, downloading and availing various applications like WhatsApp, Skype, Facetime, IMO for audio and visual transmission, however, ISP has no concern with such applications facilities nor does he provides or controls the same or charge any fee/amount.

“The amount that ISP charges from its customer is for the Internet connectivity only,” the court ruled, adding that in fact, no amount is charged even by the application provider for availing the said application, the facility being free of charge, also since it has not even been claimed that any rate of any fee or charge has been determined, or prescribed there for, and whereas telecommunication services were otherwise, liable at the relevant time to duty at the rate of 17 percent of the charges, and on this corollary in terms of sub-section 2 of Section 12 of the Act, the internet services, which fall within the category of telecommunication service also would have, but for the exemption, been liable to FED at the rate dependent upon the free charge, however, since there is zero charge in respect of internet service, as neither any amount is paid nor is any prescribed, non-duty can therefore be charged due to this handicap also.”