Withdrawal of proposed tax on SMS welcomed


KARACHI: Cellular phone companies welcomed the withdrawal of 20 piasas proposed tax per Short Messaging Service (SMS) and added that all other budgetary measures will bode well for the consumers and sector.

They said that the government's decisions to remove and decrease duties on telephone service will have a positive impact on the consumption pattern of the users as it will directly enhance the operators and government's revenue with handsome growth.

In the Finance Bill 2009-10, the federal excise duty (FED) and general sales tax (GST) has been reduced to 19.5 percent from 21 percent. The SIM Activation Tax has been slashed to Rs 250 from Rs 500 per connection, Rs 250 regulatory duty has been removed and customs duty has been cut to Rs 250 from Rs 500 per handset.

Executive Ufone, Moazzam Ali Khan, said the government's decision to minimise the tax burden is 'people friendly' as a great number of consumers frequently use text services through company's SMS packages. He added that all the tax reductions will also favour the company and government's revenues because the increase of services consumption will also improve their revenues. Ufone, one of the leading cellular phone operators with nearly 20 million subscribers, offers monthly and daily SMS bundles to its consumers.

According to available PTA data, around 11 billion SMS were exchanged in the last quarter of 2008. SMS are frequently exchanged for marketing and advertisement purposes that also include SMS banking. Electronic media widely receives feedback from SMS that will be continued with the existing pace after the new decision remains intact. An official of Zong, Amir Pasha also hailed the government's decision of taking back proposed 20 paisas tax on SMS, saying it will increase the text traffic of the users in the current accelerated pace.

He mentioned that around 0.15 million deaf and dumb customers use message service through different networks of cellular phone companies and will get benefit.

Zong, having fastest growing subscribers' base in the current fiscal year, has introduced daily SMS bundle package first in the sector for its users. Telecom analysts forecast a 20 paisas levy per SMS in addition to the FED and GST will hit the SMS traffic on the network of cellular phone companies.

They said that all the SMS packages offered by various mobile operators will end as each SMS cost will witness whopping surge after the proposed tax.

If a company offers 500 SMS against Rs 2.99 including 21 percent FED/GST, it charges 0.723 paisa per SMS. Now with the imposition of proposed 20 paisas tax, the SMS cost will increase to 20.723 paisa per SMS, which is 2,666 percent up with the existing price.

However, the government would be estimated to earn Rs 2.2 billion in the quarter keeping in view the latest available SMS traffic data of PTA, 11 billion.

But analysts said the SMS traffic will come down sharply if the duties are imposed on it as more than 40 percent users of the total 93.138 million base prefer to communicate with text rather than voice service.

Almost all the operators have started SMS services in Urdu that benefit their users in rural areas.