ISLAMABAD: The Federal Board of Revenue (FBR) has disclosed that local mobile phone manufacturing received a significant boost through sales tax exemptions amounting to approximately Rs33 billion during the year 2024.
This detail comes from the FBR’s latest tax expenditure report, highlighting a major fiscal incentive provided to the technology sector.
Exemption under Sales Tax Act
The substantial tax relief was primarily facilitated under the provisions of the Ninth Schedule of the Sales Tax Act, 1990.
This specific measure allows manufacturers of mobile devices within Pakistan to supply their finished products without the standard sales tax obligations. The policy’s original intent was to cultivate and strengthen Pakistan’s domestic mobile assembly capabilities.
According to the FBR data, these exemptions covered the supply of mobile phones in Completely Built Unit (CBU) form within the country. This is in addition to existing concessions applicable to imported components in Completely Knocked Down (CKD) or Semi-Knocked Down (SKD) states. These combined tax structures have been credited with encouraging local production efforts and contributing to maintaining relatively accessible prices for consumers.
Taxation Based on Price Brackets
The report further elaborates that the tax treatment of imported or domestically supplied phones, including both cellular and satellite types, is determined by their import value, categorized into several price tiers:
Devices exceeding US$500 in value are subject to tax based on their full import value or the equivalent amount in Pakistani Rupees.
A lower tax bracket applies to phones valued between US$350 and US$500.
Additional exemption considerations are extended to devices priced between US$200 and US$350.
Mobile handsets falling within the US$100 to US$200 range also qualify for reduced tax rates.
The lowest price category, encompassing phones valued between US$30 and US$100, benefits significantly, with many receiving near-total sales tax exemption.
Scrutiny and Future Considerations
While these tax concessions were implemented with the goal of attracting investment into the local mobile manufacturing sector and reducing reliance on imports, the considerable scale of revenue foregone has drawn scrutiny.
Tax policy analysts suggest that a comprehensive review of these incentives may be necessary. The aim of such a review would be to achieve a better balance between providing stimulus for industrial growth and meeting national revenue objectives.
Given the rapid growth in mobile phone penetration across Pakistan, the Rs33 billion figure for sales tax exemption has initiated a pertinent discussion regarding sustainable fiscal strategies and the long-term trajectory of mobile technology development in the nation.
