Daily Times

KARACHI: Industry stakeholders have rejected the proposed hike in the sales tax on import of mobile phones in the annual budget 2016-17, saying the hike will promote mobile phone smuggling instead of benefiting the exchequer.

Talking to Daily Times, Q Mobile Director Zeeshan Yousuf said, “The mobile phone industry will see a rise in smuggling of smart phones as a result of the General Sales Tax (GST), which has been doubled in the budget 2016-17.” He said the government was well aware of the smuggling phenomenon, but even then it was continuously imposing taxes on mobile phones on different accounts. “It seems the government wants to promote smuggling,” Yousuf said.

“Rise in the GST will tempt mobile phone sellers to further rely on the existing grey channel that will eventually increase unregistered sale of mobile phones,” he added. He said that a significant decrease in legal imports was witnessed in the last fiscal year after the government increased the GST on the mobile phone imports in the last budget. “The hike in the sales tax on the mobile phones will lead to an increase in street crimes and grey imports,” said Kokab Iqbal, chairman of the Consumer Association of Pakistan (CAP). He urged the government to withdraw this hike because mobile phone was a necessity and not a luxury anymore. He said that telecom companies were in early stages to broaden next generation technologies’ network in the country and this hike will hurt their businesses. A telecom official, requesting anonymity, said, “The increase in taxes on handsets will adversely affect the growth of the mobile broadband penetration, as affordability of smart phones is a major issue for the masses.” He said that people from low-income groups would find it more difficult to own a mobile broadband enabled handset, which would be an unhealthy development for the industry. He said that at a time when the government had auctioned off another spectrum, there should be some relief instead of burdening the customers with additional taxes. Earlier, the finance minister in his budget speech announced hike in sales tax on import of mobile phones. He said, “In order to stop misdeclaration and to bring the tax structure in line with market prices, the rates of sales tax on mobile phones are being rationalised. The existing sales tax rates of Rs 500 and Rs 1,000 are proposed to be increased to Rs 1,000 and Rs 1,500 for medium and high category mobile phones, respectively”. The rate of tax on low category mobiles will remain unchanged at Rs 300, he added. In the last budget the government imposed taxes on mobile phones in proportion to Rs 300, Rs 500 and Rs 1,000 based on their features.