• The government plans to increase duties and taxes on commercial imports of mobile phones.
• The removal of the sales tax zero rating for mobile phone packaging is under consideration.
• Current sales tax applies to Completely Built Units (CBUs) and imports in CKD/SKD condition.

As the anticipation for the upcoming 2024–25 budget builds up, the government in Islamabad is expected to implement changes that will impact the mobile phone industry. Reports suggest that there will be an increase in duties and taxes on commercial imports of mobile phones.

One of the key strategies the government is looking to implement is differentiating between imported and locally manufactured mobile phones. This move aims to promote local production and boost the domestic mobile phone industry.

Additionally, there is a possibility that the sales tax zero rating for packaging mobile phones may be removed under the proposed changes in the Mobile Device Manufacturing Policy.

Currently, sales tax is applicable on Completely Built Units (CBUs) at the time of import or registration of the International Mobile Equipment Identity (IMEI Number) by CMOs. This taxation also extends to imports in Completely Knocked Down/Semi Knocked Down (CKD/SKD) condition and 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 scrap the advance tax rate on telecom customers. The OICCI argues that most telecom users fall below the taxable income threshold, and the tax acts as a barrier to the affordability of mobile services.

In its tax proposals for Budget 2024–25, the OICCI has also recommended improving the withholding tax system to make tax claims and verification more transparent and less burdensome.

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

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This increase in taxes poses challenges to the affordability of mobile services, which are crucial for the entire population, particularly since more than 70 percent of Pakistan’s population lives below the poverty line.

Telecom services also play a significant role in the economic development of the country, making these tax proposals and changes in the mobile phone industry significant topics for discussion and consideration in the upcoming budget.