FBR collected Rs5.8bn tax from expatriate mobile phones in FY20

Updated 30 Aug 2020

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Travellers brought 1.4 million handsets into the country and paid duty under Dirbs in 2019-20. — APP
Travellers brought 1.4 million handsets into the country and paid duty under Dirbs in 2019-20. — APP

ISLAMABAD: The Federal Board of Revenue (FBR) has raised more than Rs5.8 billion in the last one year from expatriates and travellers on import of mobile phones under baggage.

Since July 1, 2019, the government has withdrawn the facility of duty-free mobile handset under the baggage rules from abroad. The decision, according to the FBR, was taken following receipt of numerous complaints of the scheme’s misuse.

Official data available with Dawn show that travellers brought as many as 1,389,707 mobile handsets between in FY20 under the baggage and registered it with Device Identification Registration and Blocking System (Dirbs).

The government has introduced Dirbs to facilitate genuine users of mobile phones and discourage its illegal flow. At the same time, the new policy was also aimed to raise revenue, discourage smuggling and potential misuse.

Prior to this policy, the government had allowed one mobile handset to be imported in baggage duty-free by Pakistani expatriate/travellers to facilitate them. However, allowing more than that was against the policy of limiting imports, revenue shortfall and possible misuse.

In the non-commercial individual category, the FBR has collected revenue of Rs7.04bn on import of popular brands from January 2019 until August 25, 2020. The import of Apple sets stood at 299,244; Samsung 700,865; Nokia 923,451; Huawei 118,665; One Plus 4,755; Lenovo 9,595; OPPO 3,665; Honor 22,980 and others 383,780, respectively.

At the same time, there is a clear policy for mobile phones import commercially. Under the commercial imports, as many as 19.806 million handsets were imported during the period FY20 at a total value of Rs209.316bn with the FBR collecting Rs39.414bn revenue on it.

According to an official source in the Ministry of Industries and Production, the government is expecting the leading brands to explore investment possibilities in Pakistan’s mobile manufacturing industry. It has already notified several tariff and procedural measures to encourage such ventures.

The source added that reportedly, M/s TCL has a plan to invest in Pakistan’s mobile manufacturing industry with M/s Airlink, with Alcatel also exploring the possibility.

At the same time, geographic proximity to China, which is a global hub for handsets manufacturing and is currently looking for investing outside the country due to increasing labour costs as well as trade tensions with USA, presents a huge opportunity for Pakistan.

In May, the government already approved mobile phone manufacturing policy which will help in nurturing an indigenous handset industry that can be internationally competitive.

There is a significant local demand due to increase in size of the market as well as sophistication in terms of migration towards 4G. Significant advantage in factor conditions due to the availability of a large number of IT-trained manpower, the country’s leading position in freelancing as well as a low costing human resource.

The related and support industries like packaging, plastics, and IT software etc already have a strong presence in the local market.

Under the policy, government will give three per cent allowance to local manufacturers for exports of mobile phones and locally assembled/manufactured sets will be exempted from 4pc withholding tax on domestic sales.

The government will maintain tariff differential between CBU Imports and CKD/SKD manufacturing till the expiry of the policy. In return, the domestic industry will have to ensure localisation of parts and components as per roadmap included in the policy.

Published in Dawn, August 30th, 2020