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Mobile phones become costlier

April 07, 2013

A Pakistani cellular phone user poses with his instruments having failed to make a call following the suspension of mobile phone services in Karachi. — Photo by AFP

KARACHI: Retailers have started charging new prices for mobile phones after imposition of general sales tax of Rs500-1,000 per set by the Federal Board of Revenue under its SRO280.

The FBR a month back  raised advance income tax to  five per cent from 1pc on mobile phone import. The mobile phone dealers  said that they got the new price list from importers and distributors of cell phones.

According to SRO280 (I)2013, issued on April 4, 2013 sales tax of Rs1,000 per mobile phone will be charged in case of smart phones or satellite phones where the term smart phones means a cellular phone having following characteristics: 4GB or higher basic memory, opening system of the type iOS, androidv2.3, android gingerband or higher, Blackberry RIM or Windows 8 or higher, Touch Screen, 5 mega pixel or higher mega pixel camera and dual core or higher processor. A sum of Rs500 per phone is case of other than smart phone or satellite phone.

Teletec Mobile director Azad Lalani explained that 2G phones now cost Rs500 more and smart phone have become costlier by Rs1,000. He said that the government did not consult stakeholders before taking the decision. " People were happy while using cheap Chinese smart phones, like Voice and other brands in the price range of Rs4,000-5,000. After government decision, cheap smart phone price would go up by Rs1,000. "

He said that the mobile phone imports had been showing growth, but the imposition of GST would hit sales and adversely affect imports and was of the view that cell-phone imports hover between 2m and 2.8m every month. He said, " in March alone, around 2.8m phones were imported. "

Azad claimed that the share of cell-phones having below Rs3,000 price tag is 80-85pc in total imports which means that people belonging to low and middle income groups would face a direct impact of Rs500 and that higher taxes and duties would only encourage cell-phone smuggling in the country.

According to import data of Pakistan Bureau of Statistics (PBS), mobile phone imports slightly improved to $460 million in July-February 2012-2013 from $452 million in the corresponding period of last fiscal year. Cell-phone imports jumped by 32pc in 2011-2012 to $688m from $452m in 2010-2011.

Karachi Chamber of Commerce and Industry (KCCI) President Haroon Agar said, "actually the Federal Board of Revenue (FBR) decision would benefit smugglers. " He claimed that cell-phones carrying over Rs50,000 price tag used to arrive through illegal channels. The decision is likely to make used cell phones dearer due to increase in the price of new phones.

Noman Zakariya, Manager Sales, United Mobile, claimed that more than 90pc of phones had been arriving under price of $20 per phone and bulk of imports were being made from China under Free Trade Agreement (FTA). However, the government was collecting Rs250 per phone as duty on non-FTA phones. “I think local sales and imports would drop by at least 50pc as a majority of the people from low income groups would be reluctant to paying Rs500 on phones previously available at Rs1,000-1,200 per set,” he said.

He said around 2.5 to 3m phones were imported every month with the import value hovering between $50m and $60m, adding the government would not get the required revenue now as smuggling would thrive in the country. " The FBR should have discussed GST and income tax issues with importers of phones and cell phone operators. "

President, Karachi Electronic Dealers Association (KEDA), Mohammad Idress Memon, urged the government to take back the decision in the larger interest of the people. He added that the association would consider filing a petition in the court if government does not take back the decision in the next 72 hours.  " The association had the support of KCCI and other chambers on the issue. "