FBR Proposes Sales Tax on Mobile Phones in Budget 2024-25

FBR Proposes Sales Tax on Mobile Phones in Budget 2024-25

PkRevenue.com – The Federal Board of Revenue (FBR) has proposed levying a sales tax on mobile phones assembled in Pakistan within the upcoming budget for 2024-25.

This suggestion has raised concerns among industry players, potentially impacting local manufacturers and consumers alike.

According to analysts at Insight Research, the FBR is considering imposing a uniform sales tax rate on all domestically assembled mobile phones. Currently, under the Mobile Manufacturing Policy 2020, handsets priced under $350 are exempt from sales tax.

The proposed sales tax levy could erode profit margins for local assemblers and discourage further investment in local mobile phone assembly. This could potentially hinder the growth of the domestic mobile phone industry, which has seen some progress in recent years.

Industry Seeks Withholding Tax Relief for Consumers

In response to the proposed sales tax, the mobile phone industry has urged the FBR to abolish the existing 15% withholding tax on mobile phone subscriptions. This tax is considered a burden for consumers, particularly considering that a significant portion of Pakistan’s population falls below the poverty line.

By removing the withholding tax, the industry argues, telecom services could become more affordable, potentially promoting digital inclusion and wider internet access.

Software Industry Seeks Tax Benefits for IT Professionals

The Pakistan Software Houses Association has also presented proposals to the FBR seeking tax reductions for the IT sector. The association recommends a reduction in payroll tax to 5% for employees of companies registered with the Pakistan Software Export Board (PSEB) and Pakistan IT Exports & Software Houses Association (P@SHA).

Furthermore, they have proposed an exemption on income tax for IT exporters registered with PSEB and P@SHA. These measures aim to incentivize growth and investment within the IT sector, potentially leading to job creation and increased export revenue.

Balancing Revenue Needs with Industry Growth

The upcoming budget is likely to be a balancing act for the FBR. While the proposed sales tax on mobile phones could generate additional revenue, it could also dampen the growth of the domestic mobile phone industry. The government will need to weigh these competing interests and consider alternative revenue sources or potential adjustments to the proposed tax structure.

Similarly, the proposed tax breaks for the IT sector aim to promote its growth and contribute to Pakistan’s exports. The FBR will need to assess the potential trade-off between short-term revenue generation and long-term economic benefits fostered by a thriving IT industry.

The final decisions within the 2024-25 budget will significantly impact both the mobile phone industry and the IT sector in Pakistan.