Telecom Sector Worst Hit by Budget 2008-09

It seems that Government of Pakistan has tried to cover their deficits from telecom sector, by applying new taxes on many telecom services. Some opine that it was a good move in current economic scenario to regain the momentum by benefiting from Telecom sector that is main contributor of Foreign Direct Investment and GST/CED since 2003/04.

Excise on telecom services were raised to 21%, which was previously 15 percent. That means now your 1 Rupee call is going to cost you Rs. 1.21 (previously it was Rs. 1.15). When I called my carrier’s helpline, they were unable to comment on this increment.

Additionally, as per News ticker on Geo TV, a new tax has been applied on all cellular subscribers, named as “Spectrum Access Fee”, under which Rs. 5 per cellular customer will be collected, valuing in total of almost Rs. 3.5 billion. We know very little about this tax, and the mechanism that will be used for the collection of this tax.

Handset market is another hit by budget 2008-09. The Nation has reported that mobile phone retailers and distributors have already started selling handsets at increased prices by charging extra PKR 500 to PKR 700 on each handset. Below is the excerpt given from the paper’s website.

The dealers are charging extra amount on the sets on which they had not paid any duty thus minting millions just after one simple announcement in the budget. Bulk importers had predicted that the imposition of duty would encourage smuggling.

Dealers have pulled out of the market huge number of mobile sets a week ago after it was speculated that the government was to impose duty on the mobile sets in the federal budget. They withdrew from the market a huge bulk of sets in order to mint money if the speculation proved true.

“Imposition of Rs 500/set import duty on mobile phones would affect the formal trade of mobile phones in the country, which was flourishing amid rising demand from domestic consumers. We believe, Rs 500/set is not significant for expensive sets, however the levy would dampen the demand for low-priced sets below Rs 4,000,” analysts said.

“Customs duty on import of mobile phones is unlikely to slow down subscriber growth given a large secondary market offering used and stolen mobile phones at low prices,” they added.

On other hands, Business Recorder has reported that Ministry of Information Technology proposed zero customs tariff rates, in the 2008-09 budget to help IT industry expand, making e-governance efficient and cost-effective.

We should expect some detailed budget bulletin in coming days.

Khaleej Times covered National Budget here
Ajj News was able to extract some facts about Budget here
M. Junaid Khan Discusses some ins and outs of Budget here, PTA has collection of some data about Telecom’s contribution towards National Economy here

Tech reporter with over 10 years of experience, founder of ProPakistani.PK