The Auditor General of Pakistan (AGP) has identified a Rs. 2.36 billion sales tax lapse by the Universal Service Fund (USF) Company. USF operates under the Ministry of Information Technology and Telecommunication (MoITT).
The AGP audit report noted violations under Section 10 of the Punjab Sales Tax on Services Ordinance 2012 and Section 9 of the Khyber Pakhtunkhwa Sales Tax Act 2022. These rules require that all taxable services must be charged, levied, and collected at prescribed rates.
According to the audit, USF awarded multiple contracts to telecom operators to expand broadband and telecom coverage in underserved areas. Payments under capital expenditure (CAPEX) totaled Rs. 15.68 billion. Of this, Rs. 5.97 billion was for completed projects, while Rs. 9.71 billion was for ongoing work.
However, the AGP found that USF failed to deduct sales tax of Rs. 2.36 billion from telecom operators. The companies also did not provide proof of payment for fiscal year 2023–24. Auditors warned that this lack of compliance caused potential revenue loss for provincial authorities and reflected weak financial oversight.
USF management defended its position, claiming the payments were subsidy grants for infrastructure development, not taxable services. The management also stated that the telecom operators were registered taxpayers without issuing any sales tax invoices.
The AGP rejected these claims, emphasizing that USF is responsible for verifying tax compliance. Auditors cautioned that the absence of proper documentation posed serious risks of non-compliance and revenue leakage.
The issue was reviewed by the Departmental Accounts Committee (DAC) on December 12, 2024, which accepted USF’s explanation and marked the matter as settled. Despite this, AGP recommended that the case be referred to the Federal Board of Revenue (FBR) and provincial authorities for final determination of tax liability.
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This observation highlights ongoing challenges in financial accountability and regulatory compliance in federally funded projects.
