By Sohail Sarfraz

ISLAMABAD: The government is planning to impose a standard rate of 17 percent sales tax on import of mobile phones having value above US$200 under the Tax Laws (Fourth) Amendment Bill, 2021.

Sources told Business Recorder here on Thursday that the government has almost finalized the new sales tax structure on the import of mobile phones. The Tax Laws (Fourth) Amendment Bill, 2021 is expected to retain the current sales tax structure on the import of mobile phones valuing up to US$200. The cellular mobile phones or satellite phones are charged on the basis of import value per set, or equivalent value in rupees in case of supply by the manufacturer, at the rate as indicated against each category in the relevant schedule of the Sales Tax Act 1990.

It has been proposed that the sales tax on mobile phones in CBU condition or CKD/SKD condition would be 17 percent in cases where the value of each phone is above US$200. If the value of the mobile phone is below $200, the existing sales tax structure may be retained under the Tax Laws (Fourth) Amendment Bill, 2021. The same policy may be applicable on the supply of locally manufactured mobile phones in CBU condition.

According to the sources, the local supplies of medicines would be zero-rated instead of exemption to avoid distortion in the sales tax regime after imposing sales tax on import of pharmaceutical raw materials under the Tax Laws (Fourth) Amendment Bill, 2021.

Proposed Tax Laws (Fourth) Amendment Bill: FBR seeks to slap 17pc ST on various items

Sources said that two proposals are under consideration in this regard. Firstly, the government is planning to impose a 17 percent sales tax on the import of raw materials used in the manufacturing of medicines, but the local supplies of medicines should be zero-rated. This means that the end product is zero-rated, but refund would be available.

The second proposal is to introduce a lower rate of sales tax on the import of pharmaceutical raw materials, but the local supplies or end product would be exempted from sales tax. The lower rate of sales tax like 5-10 percent at the import stage would create distortion in the sales tax regime, which would be avoided.

To avoid distortion, there is a strong likelihood that 17 percent sales tax would be imposed on the import of raw materials, whereas the end product would be sales tax zero-rated. The FBR should also introduce a speedy sales tax refund payment system for the pharmaceutical sector on the pattern of ‘FASTER’ system, they added.

The article was originally published in Business Recorder on December 13, 2021.