Govt likely to hike taxes on commercial import of mobile phones

ISLAMABAD: The government is expected to raise duties and taxes on the commercial import of mobile phones in semi knocked down/completely knocked down (SKD/CKD) conditions in the upcoming 2024-25 budget.

Sources indicate that the government plans to distinguish between imported and locally manufactured mobile phones to promote local production. There is also a possibility that the sales tax zero-rating for packing mobile phones could be abolished under the proposed changes to the mobile device manufacturing policy.

Currently, sales tax is applied on CBUs (complete built units) at the time of import or registration of international mobile equipment identity (IMEI number by CMOs).

It is also applicable on imports in CKD/SKD (Completely Knocked Down/Semi Knocked Down) condition and on the 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 abolish the advance tax rate on telecom subscribers.

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The OICCI argues that most telecom subscribers fall below the taxable income limit, and the tax is hampering the affordability of mobile services. In its tax proposals for the 2024-25 budget, the OICCI also recommended revamping the withholding tax regime to make tax claims and verification more transparent and less burdensome.

The chamber noted that the advance tax on telecom services was reduced from 12.5 per cent to 10 per cent for the fiscal year 2021, and further to 8 per cent for future years via the Finance Act, 2021. However, the Finance (Supplementary) Act, 2021, increased the withholding tax rate from 10 per cent to 15 per cent.

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