ISLAMABAD

The Ministry of Information Technology and Telecommunication (MoITT) has proposed a wide-ranging package of fiscal incentives for Pakistan’s telecom sector, including exemption from withholding tax, lower import duties on telecom equipment and reduced taxes on mobile handset components, in a bid to attract investment, create jobs and strengthen digital connectivity.

According to official sources, the ministry has urged the government to introduce tax relief measures for the telecom industry, arguing that the sector has become a cornerstone of Pakistan’s digital economy and remains critical to future economic growth.

The ministry noted that telecom operators have invested nearly $5 billion over the past five years while contributing around Rs1.7 trillion to the national exchequer during the same period. The industry currently serves approximately 200 million subscribers and contributes nearly Rs400 billion annually in taxes.

As part of its proposals, the ministry has recommended exempting telecom operators from the existing 6 percent withholding tax, describing the current mechanism as a financial burden that affects liquidity and limits investment capacity.

Officials argued that operators are required to make advance tax payments months before final assessments and reconciliations are completed, tying up substantial financial resources that could otherwise be directed toward network expansion and technological upgrades.

The ministry has also highlighted the sector’s recent commitment of $510 million for spectrum acquisition aimed at supporting next-generation mobile services, including 5G technology.

In a separate proposal, the ministry has sought reductions in customs duties, additional customs duties and regulatory duties on imported telecom equipment to facilitate the deployment of network infrastructure and improve service quality.

Officials maintained that telecom infrastructure should not be treated as a luxury category, arguing that digital connectivity has become essential for economic activity, education, healthcare, business operations and public services.

“The telecom sector is now a critical national infrastructure industry and a key enabler of digital transformation,” sources quoted ministry officials as saying.

The ministry has further proposed reducing taxes on components used in the local manufacturing and assembly of mobile phones to make smartphones more affordable and support wider digital inclusion.

According to officials, lower taxes on handset components would encourage investment in local manufacturing, generate employment opportunities and improve access to affordable smart devices, particularly for low-income consumers.

The proposals come as Pakistan prepares for the transition to 5G services, with industry stakeholders repeatedly calling for a more investment-friendly tax regime to support network expansion, improve service quality and accelerate digital transformation.

The ministry believes the proposed package of tax incentives could unlock fresh domestic and foreign investment, strengthen local manufacturing and enhance the telecom sector’s contribution to the national economy.