If you are planning to buy a new mobile phone, it would help to understand revised tax slabs that the Federal Board of Revenue unveiled on Monday because it could save you money.
Under the new duty structure, the price of a mobile phone may have come down or it may have gone up. Whether you will pay more or less on your next phone will depend on one of the 6 tax slabs the FBR has introduced.
For example, for an Rs25,000 mobile phone, you will now pay Rs2,700 in duty. This duty is almost half of (Rs5,000) what you had to pay for the same phone in the previous tax structure.
Similarly, for all mobile phones valued at $30 or less, the duty has been reduced to Rs180 per set(previously it was Rs250).
But the price of some mobile phones may have gone up. For example, an Rs5,000 phone will now cost you an additional Rs1,800 in regulatory duty (up from the old Rs250).
Any increase or decrease in duty under the new tax structure will change the price of mobile phones.
But there is more bad news.
In addition to regulatory (customs) duty, you also pay other taxes, such as sales tax, advance sales tax, advance income tax and a mobile phone levy if the mobile phone is valued at more than Rs10,000. There are other taxes that you pay on top of the customs duty. All these taxes remain unchanged but one can compare customs duty in the new structure with that in the old one to find the difference. Under old structure, a flat Rs250 were charged for mobile phones worth up to $60. Those valuing above that and up to $130 had a duty of 10% duty while the highest slab (mobile phones worth above $130) had a rate of 20%.
The old structure has been revised into six new slabs now. The following table shows new rates and can help you find out whether a phone will cost you more or less when compared with previous rates of customs duty.
The government says it has to take harsh steps, such as raising duties on mobile phones, to stop smuggling, which costs the exchequer millions in tax evasion. Last December, the government increased duties on mobile phone imports and imposed restrictions on the number of mobile phones individuals bring to Pakistan. Now Pakistanis traveling to Pakistan can bring only five mobile phones with them in a tax year and of those only ones will be exempt from duty. They will have to pay for every extra mobile they will bring with them.
A customs official recently told Samaa Digital that the old tax structure was very complex and the government was working on simplifying it. The objective is to stop smuggling since up to 40% of our imports are smuggled products, he said.
“Once, we have done away with it and simplified the tax structure, the government will certainly consider reducing taxes, especially on low-end phones,” the official had said.
The government is facing a budget deficit of over Rs2 trillion because of a very low tax base and rampant tax evasion. Increasing duties on high-end mobile phones is one of the measures in that direction. However, critics say such high duties on imports of mobiles will hurt both traders as well as consumers. Higher duties will make devices more expensive and out of reach for marginalised segments of society and deprive them of all the benefits the internet has to offer. It will slow down internet penetration and growth of the internet-based economy, they say.