The Auditor General of Pakistan (AGP) has raised serious concerns over the non-deduction of Rs. 2.36 billion in provincial sales tax by the Universal Service Fund (USF) a key organization under the Ministry of Information Technology and Telecommunication (MoITT) responsible for expanding broadband and telecom access in underserved regions.
The AGP’s audit, conducted under Section 10 of the Punjab Sales Tax on Services Ordinance 2012 and Section 9 of the Khyber Pakhtunkhwa Sales Tax Act 2022, found that USF failed to deduct due taxes while making payments to telecom operators for development projects. The audit reviewed payments totaling Rs. 15.68 billion, including Rs. 5.97 billion for completed projects and Rs. 9.71 billion for ongoing ones.
Audit Findings and Dispute
According to the report, the USF Company did not deduct sales tax worth Rs. 2.36 billion, nor did the telecom operators provide any evidence of having paid it during FY 2023–24.
“This lapse reflects weak financial oversight and results in potential loss of provincial revenue,” the auditors stated.
In defense, USF management argued that these payments were subsidy grants for infrastructure expansion not taxable services and that telecom firms, being registered taxpayers, hadn’t issued sales tax invoices. However, the auditors rejected this explanation, insisting that USF was obligated to ensure full compliance with tax laws and verify payment records.
Committee Review
The issue was discussed in a Departmental Accounts Committee (DAC) meeting on December 12, 2024, which accepted USF’s explanation and marked the matter as settled. Yet, the AGP maintained its objection, recommending that the case be referred to the Federal Board of Revenue (FBR) and provincial revenue authorities for final determination of tax liability.
Experts warn that the case highlights systemic tax compliance gaps in state-run ICT development programs and calls for stronger financial oversight mechanisms within MoITT and its subsidiaries.