Islamabad High Court (IHC) issued a stay order till May 27 on Tuesday preventing the government from blocking mobile phone SIMs of tax non-filers.

Chief Justice Aamer Farooq led the proceedings of the petition filed by a private mobile company.

Last week, the telecom operators after several deliberations with the Federal Board of Revenue (FBR) were reported to have agreed to initiate the manual blocking process of the SIMs of non-filers in small batches until their systems were fully equipped to automate it.

On April 30, the FBR issued the Income Tax General Order (ITGO) to disable the mobile phone SIMs of 506,671 persons who were not appearing on the active taxpayer list but are liable to file the Income Tax Returns for Tax Year 2023 under the provisions of the Income Tax Ordinance.

Advocate Salman Akram Raja appeared in court on behalf of the private mobile company and argued that the amendment in the law violates the fundamental right to business freedom enshrined in Article 18 of the Constitution.

He further argued that the companies would face a loss of Rs1 billion annually if more than 500,000 SIMs were blocked.

On May 12, it was reported that telecom operators blocked mobile phone SIMs of over 3,500 non-filers of the 5,000 cards. The action came in line with the FBR's Income Tax General Order (ITGO) -- a move aimed at compelling 506,671 individuals to place on record their returns for 2023.

Earlier on May 7, the telecom industry penned a letter to the Ministry of IT & Telecom and the Pakistan Telecommunication Authority (PTA) stating that they are mandated to provide uninterrupted services to their customers, except in circumstances specified in the Telecom Act and relevant regulations.

While the intention of the Income Tax General Order (ITGO) may be to penalise non-compliant individuals or to encourage them to enter the tax net, the specific measure being adopted lacks proper consideration. Neither a legal analysis, guaranteed constitutional rights nor a cost-benefit review has been conducted by the Federal Board of Revenue (FBR) prior to passing and implementing the ITGO.

The industry further noted in the letter that rushing through this ITGO will adversely affect customers, impacting their ability to access essential services, now recognised as a right to life under various judgments of superior courts. It also undermines the rights and operational capacity of telecom operators who are fully compliant with tax obligations. Any delinquent individuals should instead be directly sanctioned without implicating and adversely affecting the telecom industry.