New Taxes on Imported Phones Expected to Increase Prices Soon
Imported Mobile Phone Prices Set to Rise with New Taxes Soon
Effective from July 1, 2024, imported mobile phones are anticipated to become more expensive due to increased duties and taxes proposed in the upcoming budget for the fiscal year 2024-25, as per sources familiar with the matter.
The Federal Board of Revenue (FBR) is reportedly recommending the implementation of a federal excise duty (FED) on mobile phones, alongside a heightened assessment of FED on imported handsets, particularly focusing on raising the Pakistan Telecommunication Authority (PTA) tax on luxury phones.
Currently, imported mobile phones are subject to a General Sales Tax (GST) rate of up to 25 percent. However, the forthcoming Finance Bill aims to further elevate this rate, aligning with the federal government’s objective to boost tax revenue by approximately Rs. 2 trillion in the next fiscal year.
Sales tax is presently imposed on Completely Built Units (CBUs) upon import or registration (IMEI number by Cellular Mobile Operators). It is also applicable to imports in Completely Knocked Down (CKD)/Semi Knocked Down (SKD) condition and the supply of locally manufactured mobile phones in CBU condition.
The proposal in the upcoming budget seeks to increase duties and taxes on the import of cellular phones, CKD/SKD condition, and their respective parts.
In response, the private sector has urged the government to eliminate the advance tax rate on telecom subscribers entirely, citing that a significant portion of the subscriber base falls below the taxable threshold, impacting the affordability of mobile services.
Additionally, the Overseas Investors Chamber of Commerce and Industry (OICCI) has suggested a revamp of the withholding tax regime to streamline tax claims and verification mechanisms, aiming for increased transparency and reduced operational complexities.
However, the withholding tax rate was raised from 10 percent to 15 percent through the Finance (Supplementary) Act, 2021, which has implications on the affordability of mobile services, critical for the majority of Pakistan’s population, particularly considering that over 70 percent live below the poverty line. Telecom services are also vital for driving economic growth in the country.
