In a move that is set to impact the cost of mobile phones in Pakistan, the Federal Board of Revenue (FBR) has announced a new 25 per cent sales tax on the import of Completely Built Up (CBU) mobile phones valued at over $500.
This change, detailed in the updated Sales Tax Act, 1990 and Federal Excise Act 2005, was issued on Wednesday and will remain in effect until June 30, 2025.
Under the revised legislation, mobile phones imported in CBU condition, with a value exceeding $500, will incur a 25 per cent sales tax. In contrast, phones valued at $500 or less will attract an 18 per cent sales tax.
Locally manufactured mobile phones in CBU condition, as well as those imported in CKD/SKD condition, will also be subject to an 18 per cent tax, regardless of their value.
This significant tax hike is likely to make high-end and mid-range smartphones even more expensive for Pakistani consumers. Devices from premium brands such as Apple and Samsung, which typically exceed the $500 threshold, are expected to see substantial price increases.
This is likely to further widen the gap between affordable and premium smartphones, potentially putting them out of reach for many buyers.
The new tax regime could also exacerbate existing market issues. Currently, some local retailers are exploiting perceived stock shortages and increased taxes to inflate prices, particularly in cities like Islamabad, Lahore, and Faisalabad. This trend could intensify as the new sales tax further drives up costs.
Compounding the issue, the FBR’s crackdown on illegal Gevey (JV) and IMEI-patched phones has not quelled the market for unofficial devices. The increasing prices of legal phones may drive consumers towards these unapproved alternatives, which are not officially PTA-approved.
The updated Sales Tax Act has also introduced a new definition of “tax fraud,” targeting deliberate understatement of tax liabilities or overstating entitlements to tax credits and refunds.
To tackle such issues, the FBR has established a Tax Fraud Investigation Wing-Inland Revenue, equipped with various units, including Fraud Intelligence and Analysis, Fraud Investigation, and Digital Forensics.
Overall, while the new tax measures aim to streamline revenue collection, they may place further financial strain on consumers and potentially inflame existing market challenges.
