Govt Likely to Increase Taxes on Commercial Import of Mobile Phones

ISLAMABAD: The government is expected to increase duties and taxes on commercial imports of mobile phones in the upcoming 2024-25 budget.

As per the media reports, the government plans to differentiate between imported and locally manufactured mobile phones to promote local production. There is also a possibility that the sales tax zero rating for packaging of mobile phones may be removed under the proposed changes in the Mobile Device Manufacturing Policy.

Currently, sales tax is applicable on CBUs (Completely Built Units) at the time of import or registration of International Mobile Equipment Identity (IMEI Number by CMOs).

This also applies to imports in CKD/SKD (Completely Knocked Down/Semi Knocked Down) condition and supply of locally manufactured mobile phones in CBU condition.

The Federal Board of Revenue (FBR) has received a budget proposal from the Overseas Investors Chamber of Commerce and Industry (OICCI) urging the government to scrap the advance tax rate on telecom customers. has been given.

OICCI argues that most telecom users fall below the taxable income threshold, and the tax is a barrier to affordability of mobile services. In its tax proposals for Budget 2024-25, the OICCI also recommended improving the withholding tax system to make tax claims and verification more transparent and less burdensome.

The chamber noted that the advance tax on telecom services has been reduced from 12.5 percent to 10 percent for FY 2021 and further to 8 percent for subsequent years through the Finance Act, 2021. However, the Finance (Supplementary) Act, 2021 increased the rate of withholding tax from 10 percent to 15 percent.

This increase hampers the affordability of mobile services, which are critical for the entire population, especially since more than 70 percent of Pakistan’s population lives below the poverty line. Telecom services are also important for the economic development of the country.