In an effort to generate additional revenue and bridge fiscal gaps, Pakistan has imposed a 25% sales tax on the import of mobile phones valued above $500 per piece, according to official sources.
This move comes on the heels of a recent increase in the standard sales tax rate from 17% to 18%, as outlined in the updated Sales Tax Act, 1990, effective until February 23, 2023.
The Federal Board of Revenue (FBR) has incorporated amendments introduced through the Finance (Supplementary) Act, 2023, in the updated Sales Tax Act. Under this updated legislation, the government will apply a 25% sales tax rate on the import of luxury items, including mobile phones with a value exceeding $500.
The FBR, responsible for administering tax laws in Pakistan, charges sales tax on the import of mobile phones under the Ninth Schedule of the Sales Tax Act, 1990. According to Table-II of the Ninth Schedule, the FBR has outlined the sales tax rates applicable to different value ranges of imported mobile phones.
For mobile phones valued between $200 and $350 and between $350 and $500, the standard sales tax rate of 18% will be applied. However, a new sales tax rate of 25% will now be levied on mobile phones valued above $500, marking a specific tax category for high-end devices.
The sales tax rates for lower-value mobile phones remain unchanged. For mobile phones valued at $30 (excluding smartphones), the sales tax will be Rs130. Importing mobile phones with a value between $30 and $100 will incur a sales tax of Rs200. For mobile phones valued up to $200, a sales tax of Rs1,680 will be collected.
This tax structure reflects an effort by the Pakistani government to enhance revenue collection, particularly from the luxury goods sector. The imposition of a higher sales tax on expensive mobile phones is expected to contribute to the country’s revenue streams while encouraging consumers to make more budget-conscious choices.
The introduction of targeted tax rates on mobile phones aligns with global trends, where governments often tailor taxation to specific product categories based on their perceived luxury or non-essential status. As the updated Sales Tax Act takes effect, the impact on consumer behavior and government revenue will be closely monitored, providing insights into the effectiveness of this taxation strategy in the context of Pakistan’s economic landscape.
