KARACHI: Pakistan’s imposition of new tax regulations has made imported high-end mobile phones around 30 percent costlier, but record local assembling has largely absorbed the impact, dealers and manufacturers said on Tuesday.
Pakistan recently imposed a uniform 17 percent sales tax on around 150 items, including imported mobile phones, to meet one of the conditions of the International Monetary Fund (IMF) for the revival of the stalled $6 billion loan program.
Apart from imposing 17 percent sales tax, the government also increased the fixed tax rate on the import of mobile phones valued more than $200.
Imported phones valued between $200 and $350 will now be subject to Rs14,661 fixed tax and 17 percent sales tax, while handsets costing above $500 would be subject to Rs37,007 fixed duty and 17 percent sales tax, according to the Federal Board of Revenue (FBR).
The fixed tax is slightly less for those who purchase phones on passports within 60 days of their arrival in Pakistan.
“The phone (iPhone 11 pro max) that was available for around Rs165,000 will now be available for around Rs230,000 after adding fixed tax and 17% sales tax,” Shahzad Ahmed, a mobile phone dealer at the Saddar mobile market in Karachi, told Arab News.
Mobile phone dealers said the budgetary impact on consumers was minimal as such high-end mobile phone penetration was very low in the country.
“Due to the availability of local alternatives for buyers, the sales impact is negligible as only high-end mobile phone prices have been increased, which are being used by quite a few consumers,” said Malik Khalid Iqbal, chairman of the All Pakistan Mobile Dealers' Association.
But the dealers resented sudden imposition of higher duty and tax, calling on the government to revisit the decision.
“They should have given time but it was implemented without that,” Rizwan Irfan, president of the Karachi Electronic Appliances Dealers’ Association, told Arab News.
“Many dealers who have booked phones and consignments that are in transition will become costlier and may not fetch the right price, so the government should revisit its decision.”
For the first time, Pakistan has surpassed imports and achieved self-reliance in local assembling of mobile phones of almost all major brands except iPhone.
The South Asian country manufactured 24.66 million mobile phones in 2021, compared to the import of 10.26 million, according to the Pakistan Telecommunication Authority (PTA). In 2020, the country imported 24.51 million phones, compared to locally manufactured 13.05 million.
“After the start of Samsung's production, 80% of all mobile phones are being assembled in Pakistan,” Aamir Allawala, senior vice-chairman of Pakistan Mobile Phone Manufacturers’ Association (PMPMA), told Arab News.
“This will go up to 90 percent, when Xiaomi starts local production in March.”
Manufacturers said tax on locally assembled phones was quite nominal as compared to the imported high-end devices.
“On locally assembled phones below $100, the tax rate is only Rs20 per unit,” Allawala said. “Tax on phones costing between $100 and $200 is only Rs420 a unit. The sales tax and excise levy is little higher for the phones valued above $200, but definitely below 10% of total tax incidence.”
Tax on locally assembled phones ranging between $350 and $500 is Rs13,210 and Rs26,380 for devices valued above $500, according to dealers and manufacturers.
They said since 80% phones were being locally produced, there was no impact for buyers in terms of pricing.
“On the other hand, iPhones and high-end Galaxy phones that are still not assembled locally have to face a price hike. This is very logical and fair in my opinion,” Allawala said.
He ruled out the possibility of iPhone assembling in Pakistan, saying, “Only 10,000-15,000 iPhones are imported every month and at this volume, I don’t think local assembling is possible. iPhone will be manufactured only when its export would be made possible and for that, Pakistan’s ecosystem is at a nascent stage.”
Mobile phone manufacturing became possible in Pakistan only after the launch of Device Identification Registration and Blocking System (DIRBS) in 2018. The system is designed to identify non-compliant devices operating on local mobile networks.
The country is still paying high bills for the import of mobile phones. It recorded mobile phone imports worth $2 billion in the last fiscal year, while these imports crossed $1 billion mark from July till December this fiscal year, according to data released by the Pakistan Bureau of Statistics.
