The Ministry of Information Technology and Telecommunication has opposed Federal Board of Revenue's (FBR) taxation on mobile phones import under Baggage Rules and recommended reduction in duties/taxes on smart phones to achieve digital vision of the government, it is learnt.
Official sources revealed to Business Recorder that a meeting was held in the Ministry of IT & Telecom where, besides Federal Board of Revenue (FBR), other stakeholders also participated and discussed mobile phones' import under the Baggage Rules.
The MoITT confronted FBR on taxes on mobile phone import, saying it was affecting IT sector's growth negatively as well as the digital agenda of the government. According to FBR, the duty-free import of mobile phones by international passengers was withdrawn vide amended SRO 689 (I) 2019 dated 29-6-2019.
They said SRO was made effective from 1-7-2019. The reasons for withdrawal of duty-free allowance were that the facility was being misused. Data of international arriving passengers was being stolen and the passport numbers and flight data were being used to enter data details in the Mobile Device Registration Software to claim exemption under the Baggage Rules.
Further expensive mobile devices were mostly being registered by using international passengers' data. Furthermore, the government desired that there should be uniformity in application of duty/taxes whether brought into Pakistan by passengers or locally procured, and, therefore, the exemption was withdrawn to avoid this anomaly. The FBR official said that around Rs 10 billion had been collected during that period from taxes on mobile imports.
However, no final decision was reached on reviewing taxation and allowing duty free import of mobile phones. Talking to Business Recorder, Secretary MoITT Shoaib Ahmad Siddiqui said if a sector could contribute to the national economy in services and exports, it was no other but the IT sector. He said if mobile phone manufacturing plants were not available, it was not feasible to import mobile phones with such taxes and duties. He said the matter had been taken up with the FBR.
Presidents/chief executive officers (CEOs) of the telecom companies, Federal Board of Revenue (FBR) and Ministry of Information Technology also submitted their viewpoints on taxation of mobile phones and allowing duty free import of mobile phones on December 24 at a meeting held at the Ministry of IT, however no decision was taken in this regard.
Chairman FBR Shabbar Zaidi had said before different parliamentary panels that recommendation for allowing duty free import of mobile phones under Baggage Rules would be tabled before the Economic Coordination Committee (ECC) of the Cabinet. Baggage Rules were misused in the past, compelling the government to withdraw the facility, he said, adding that duty/taxes were applicable on import of every mobile phone set.
Presidents/chief executive officers (CEOs) of four telecom companies collectively informed Abdul Hafeez Shaikh, Advisor to the PM on Finance, about the taxation on import of mobile devices and smart phones. The companies recommended retention of the current tax structure on low end 2G handsets/feature phones (i.e. Rs 500 as tax per device); reduction in tax/duty on 3G/4G handsets (smart phones) below Rs 10,000 and cap it to a maximum of Rs 1,000 per device and reduction in tax/duty on smart phones in the higher price brackets and cap it to a maximum of Rs 5,000 per device.
They further informed that a tax regime that focused only on the short-term gains was going to negatively impact the uptake of Internet of Things (IoT) ecosystem in the country including smart watches, sensors, smart metering, smart cities and other upcoming machine-to-machine (M2M) systems. This shall also impact the government's efforts to introduce 5G in future.
The import of mobile phones into the country increased by 63.62 percent during the first five months of current financial year (2019-20) as compared to the corresponding period of last year.
Pakistan imported mobile phones worth $498.466 million during July-November (2019-20) as compared to the imports of $304.651 million during July-November (2018-19), showing growth of 63.62 percent, according to the latest data issued by Pakistan Bureau of Statistics (PBS).
On year-on-year basis, the import of mobile phones witnessed growth of 150.29 percent in November 2019, as compared to the imports of the same month of the last year. The mobile imports during November 2019 were recorded at $110.725 million against the imports of $44.238 million in November 2018.
On month-on-month basis, the imports of mobile phones, however, witnessed a decline of 6.68 percent during November 2019, as compared to the imports of $118.654 million during October 2019, according to the data.
Overall telecom imports saw an increase of 25.07 percent during July-November 2019 when compared to the same period of last year. Total imports were recorded at $682.762 million during this period when compared to $545.920 million in July-November 2018, while registering a 7.96 percent negative growth in November 2019. This figure stood at $147.650 million in November as compared to $160.424 million during October 2019.
Other telecom apparatus imports witnessed a phenomenal decline of over 23.61 percent in July-November 2019 as they stood at $184.296 million against $241.269 million during the same period of the last year. When compared to October 2019, other telecom apparatus imports registered 11.60 percent negative growth as these remained $36.925 million compared to $41.770 million in October 2019.