IN a development that would be widely welcomed by the phone users, the Sindh High Court has struck down the federal excise duty of 75 paisa on every phone call of over five-minute duration and declared the levy against the Constitution.
The court annulled the levy of the tax on the grounds that the federal government did not have the authority to tax telecommunication services that under the Constitution fell under the domain of the provinces.
No doubt, the judgement is based on interpretation of the Constitutional scheme of things but it will surely provide relief to the consumers as well as cellular companies, whose business interests were hurt by the ill-conceived levy.
The FED was imposed in the federal budget and it was to generate Rs 15 billion revenue for the Government but it was seen as disincentive against long calls.
Originally, the Government also planned to tax the SMS and use of Internet but then sanity prevailed and the proposal was withdrawn in the face of resistance even by members of the ruling party.
Otherwise too, we have been emphasizing in these columns that it is an era of telecom and IT and nothing should be done to discourage their use for the sake of a few billion rupees.
The loss of revenue is easily compensated if the sector is allowed to expand and people are encouraged to use IT and telecom services.
The verdict of the court has also highlighted another aspect of the taxation — imposition of taxes that the Federal Government is not empowered to levy.
The Constitution clearly stipulates power of the Federal and Provincial Government to impose taxes but in this case none of the lawmakers in the National Assembly and the Senate pointed out the illegality of the FED.