In a sudden move before budget 2015-2016, Government of Punjab imposed 19.5% internet tax on broadband services. Through Punjab Sales Tax on Services Act 2012 the government stands to gain millions within the month of June through this tax.
The tax will be applied on broadband services, both residential as well as mobile, where total bill is above Rs. 1,500/ and where internet speed if above 2 Mbps. This is similar to the tax already applied in Sindh by provincial government for fiscal year 2014-2015. The tax will be applicable from May 29th, 2015 and following will be exempted according to the notification:
- Internet provided to educational institutions via dedicated lines for educational and research purposes
- Student internet packages (verified purchase by a student) of up to 2 Mbps valuing no more than Rs. 1,500
- Software exporting firms registered with P@SHA (charges on internationally leased lines)
This is a major development because province of Punjab has more than half of Pakistan’s population and internet penetration is gaining strength with the introduction of 3G/4G services. The imposition of this tax will enable Government of Punjab to earn millions in the month of June but will severely hurt broadband industry.
Most broadband companies are in the process of upgrading subscribers to higher speeds and many people were choosing better packages on their own. This process will come to a stand still and many users would be hesitant to choose packages above 2 Mbps or those with bill higher than Rs. 1,500.