FBR revises sales tax on mobile phones

The Federal Board of Revenue (FBR) on Thursday revised the downward rate of sales tax on mobile phones and changed the mode of collection.

On April 4, the FBR issued a notification that the tax would be deducted at source from importers of mobile phones and would be passed on to the end consumers. The move was initiated to improve recovery of taxes from the sector.

Since then, the importers lobbies were putting pressure on the FBR to reverse the decision and also reduce the rate of sales tax.

Succumbing to the pressure, the FBR has not only introduced three slabs, but also lowered the maximum rate of duty from Rs 1,000 on per cellular mobile phone to Rs 750, while for low priced mobile phones the duty was lowered by Rs 50 per set to Rs 450 from earlier Rs 500.

The standard rate of sales tax under the Sales Tax Act 1990 is 16 per cent and prices of new mobile phones go as high as around Rs 80,000 or more.

At the standard rate of sales tax, the amount of sales tax payable on a mobile phone costing Rs 50,000 would be Rs 8,000, but under the new SRO the fixed sales tax is only Rs750, which comes to less than two per cent.

A notification SRO 460 of sales tax was issued on Thursday to amend the April 4, 2013 notification.

As per the new notification, an amount of Rs150 will be charged at import stage on low priced mobile phones. These phones will have two mega-pixels or less camera, 2.6 inches or less screen and keypad. A standard rate of Rs 250 will be collected on supply at the time of sale or activation of SIM Card.

The notification said the sales tax on supplies of cellular mobile phones shall be charged, collected and paid by the cellular company operators on every new sale or activation of SIM card. And no SIM card shall be sold or activated by a cellular company operator without charging and collecting the new sales tax rates.

Earlier, the sales tax collection on such phone was Rs500 per set.

A new category with medium priced mobile phones was introduced to reduce the rate of sales tax to a maximum on those mobiles. These phones will have 2.1 to 10 mega-pixels one or two cameras, between 2.6 inches and 4.2 inches screen size and less than 2 GHZ micro-processor.

The rate of duty now reduced to Rs 250 on import stage, while a similar amount will be collected on supply of medium priced mobiles at the time of sale or activation of SIM Card. Such mobiles earlier attract Rs 1000 per set which is now reduced to Rs500.

The smart cellular phones or satellite phones will fall in the third category. These phones will have 10 mega-pixels and above one or two cameras, 4.2 inches and above touch screen size, 4 GB or higher basic memory, operating system of the type iOS, Android V2.3, Android Gingerbread or higher, Windows 8 or blackberry RIM and 2 GHZ or higher, dual core or quad core micro-processor.

The rate of sales at import stage of the third category will now be Rs500 in addition of Rs 250 on supply of these mobiles at the time of sale or activation of SIM Card.