Business Recorder
ISLAMABAD: The National Assembly Standing Committee on Finance on Thursday directed the Tax Policy Unit of the Ministry of Finance and the Federal Board of Revenue (FBR) to urgently rationalise duties and taxes on imported mobile phones for announcement in the coming budget (2026-27). Primarily, the proposal was to reduce sales tax from 25 percent to 18 percent on high-end mobile phones in CBU condition exceeding USD 500. Mobile phones having an import value of less than USD 500 are subjected to 18 percent sales tax. However, the Federal Board of Revenue (FBR) as well as the Tax Policy Unit did not agree with the proposal of reducing sales tax from 25 percent to 18 percent on high-end mobile phones above USD 500. The issue was discussed in detail during the 23rd meeting of the Standing Committee on Finance and Revenue held here on Thursday under the Chairmanship of MNA Syed Naveed Qamar. Naveed Qamar directed the Tax Policy Unit/FBR to come up with some out-of-the-box solution to end the traditional policy of imposing restrictions on imports for the last 30 years. There is a need to reexamine the economic impact of these irrational taxes on consumers. State Minister for Finance Bilal Azhar Kayani endorsed the viewpoint of the committee and committed that the next federal budget would consider the rationalization of duties and taxes on imported mobile phones. Head of Tax Policy Unit, Dr Najeeb, categorically informed the meeting that there is no space to reduce the standard rate of 18 percent sales tax on imported mobile phones, as well as withholding income tax. Presently, minimum withholding tax is applicable on imported mobile phones under the policy of “pay as you earn”. There is no room to reduce sales tax, duties or income withholding tax on imported mobile phones as concessionary rates of income tax are already applicable on them, Dr Najeeb stated. Federal Board of Revenue Chairman Rashid Mahmood Langrial briefed the committee that the 18 percent sales tax is currently imposed on mobile phones, along with income and withholding taxes. Taxes on high-end imported mobile phones can reach up to 55 percent of their value, while locally manufactured phones are taxed at around 25 percent. The committee was informed that mobile phone pricing above USD 500 is subject to taxes of up to Rs 76,000 having tax rate of 54 percent. The tax rates have gone up to 55 percent for devices within the range of USD 700-USD 750. The committee recommended a reduction in taxes on mobile phones; however, FBR officials stated that there is currently little room to reduce GST or withholding tax rates. Chairman Syed Naveed Qamar urged the government to present a clear policy on mobile phone taxation in the upcoming federal budget, emphasizing the need to promote modern technology for economic growth. The committee was briefed on the duties and taxes levied on mobile phones. The committee was apprised of the existing taxation regime applicable to mobile phones, including the rates of income tax and sales tax imposed on imported as well as locally manufactured devices. The briefing covered the tax structure for CBU and CKD/SKD imports based on the assessed value of mobile phones, along with the relevant provisions of the Income Tax Ordinance, 2001, and the Sales Tax Act, 1990. The committee was further informed about the statutory exemptions available for mobile phones imported by blind persons and those brought under personal baggage rules, as well as the applicable sales tax rates ranging from 18 percent to 25 percent ad valorem depending upon the value and classification of the device. Chairman Syed Naveed Qamar expressed displeasure and observed that withholding taxes are not income tax, but these are sales tax. He directed the Tax Policy Office to review the matter and furnish a comprehensive written note on the rationale, revenue impact, and policy objectives of the existing tax rates on imported and locally manufactured mobile phones, particularly in respect of CBU and CKD/SKD categories. The committee recommended that the prevailing taxation structure be reviewed to ensure equity, consumer affordability, and the encouragement of local manufacturing, while also examining the adequacy of the existing exemptions available under the Income Tax Ordinance, 2001, and the Baggage Rules, 2006. FBR officials said that sub Clause (xix) of clause (56) of Part IV of the Second Schedule to the Income Tax Ordinance, 2001, provides that, blind talking mobile phones imported under section 148 of the Income Tax Ordinance, 2001, by blind persons as per rules issued by the Board in the light of respective PCT headings are exempt from payment of withholding tax at import stage. Clause (60E) of Part IV of the Second Schedule to the Income Tax Ordinance, 2001, provides that, mobile phones brought in personal baggage under Baggage Rules, 2006 are exempt from payment of tax chargeable under section 148 of the Income Tax Ordinance, 2001. With respect to Sales tax on cellular mobile phones, which is chargeable on an ad valorem basis under Table II of the Ninth Schedule to the Sales Tax Act, 1990, it provides separate rates for import in CBU condition, import in CKD/SKD condition, and supply of locally manufactured mobile phones. Mobile phones having an import value not exceeding USD 500 per set are chargeable to sales tax at the rate of 18 percent in all three categories. Where the import value exceeds USD500 per set, the mobile phones imported in CBU condition are chargeable at 25 percent, and CKD/SKD imports and locally manufactured mobile phones remain chargeable at 18 percent. In case of import of cellular mobile phones, the liability to discharge sales tax shall rest with the importer, whereas in case of cellular mobile phones supplied or manufactured locally, the liability to pay sales tax shall rest with the local manufacturer. The time and manner of payment of tax shall be governed by section 6 of the Sales Tax Act, 1990, the FBR officials added. Copyright Business Recorder, 2026
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