ISLAMABAD: The Pakistan Telecommunication Authority (PTA) has warned the government that the significant increase of 17 percent in sales tax on mobile devices in the mini-budget is likely to hamper the planned 5G spectrum auction, besides negative impact on Digital Pakistan vision and hamper development of startup businesses in e-commerce and digital financial services.

Officials documents available with Business Recorder revealed that the Authority has shown serious concerns, while observing that the significant increase in sales tax would hit the general public badly.

After implementation of Finance (Supplementary) Act, 2022, the FBR has implemented 17 percent sales tax on devices values above USD 200 for Completely Built Unit, (CBU) being imported by commercial and individuals within territory of Pakistan. This implementation of Finance (Supplementary) Act, 2022 has adversely impacted general public.

Below is the table extracted from the FBR for Custom duties rates notified by them in light of the Finance (Supplementary) Act, 2022.

Below is benchmark analysis for custom duties before and after implementation of Finance (Supplementary) Act, 2022 being applied for Individual category registration by the FBR.

The new values have been extracted based on DIRBS registration data against the generated PSID and Custom duties against applied mobile device by FBR. However, this value is subject to vary based on value of each device variant against which FBR applies 17 percent Ad Valorem (imposed at a rate percent of value).

Based on above analysis, following the PTA has made several observations and submitted for government consideration please;• Affordability Impact on Mid-Range Mobile Phones: - It is clearly visible that the new tax regime impact on Mid-Range mobile phones is significant ranging from an increase of 119% in USD 100-200, 199% in USD 200-350 and 138% in USD 350-500. This impact has affected the affordability for general consumers and will restrict them from buying smart phones for use in Pakistan.

Adverse Effect on Digital Pakistan Vision: - With the exorbitant increase in custom duties due to Finance (Supplementary) Act,2022 it will adversely impact Mid and High-End mobile device consumers, who intend to use such mobile devices for their businesses, e-commerce, digital financial services etc. activities.

The high prices for mobile device will restrict them from using such devices and impact Digital Pakistan vision and development of 4G smart phone eco system in Pakistan.

High End Mobile Devices vs Local Manufacturing: - PTA has issued mobile device manufacturing authorization to 30 companies.

In 2021, these companies manufactured over 24 million mobile phones (10 million 4G smart phones in Low/Mid-Range category and 14 million 2G phones in basic low-end category). Currently, no company is manufacturing any high-end mobile devices (above USD 500 category). #

With an increased custom duty of 85% from previous tax regime, this high-end category of mobile devices availability in Pakistan will be impacted adversely in terms of consumer affordability as well as will adversely impact on the PM’s vision and endeavour to family relief to common citizens against price hike.

Impact on 5G Spectrum Auction: - Spectrum auction for 5G technology is planned in near future, however due to the increase in custom duties, the availability of 5G mobile devices will a challenge due high taxation being applied. This will likely hamper the 5G spectrum auction initiative by the GoP.

The Authority has concluded that this significant rise in custom duties shall have a negative impact on government’ Digital Pakistan vision and hamper development of startup businesses in e-commerce, digital financial services, freelancing, IT services, e-health etc, where such mobile devices are a basic necessity for their business needs.

In modern day and age, mobile device is no longer a luxury but it has now become a basic necessity in this age of technological era, it added.

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