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This is How the Mini-Budget Will Impact Phone and Auto Prices

By Sajawal Rehman & Amin Yusufzai

The mini-budget, proposed by the Finance Minister Asad Umar in yesterday’s National Assembly session, includes major revamps in the Finance Act 2018.

The main focus was to shore up the revenues while reducing the budget deficit from 6.6% to 5% in a year.

Major changes were expected in the auto industry especially the imports as well as the smartphone industry.

Auto Industry

Pakistan’s auto industry has been dominated by Japanese giants including Honda, Toyota and Suzuki. Considering the trade deficit due to rising imports, the new budget’s aim was to reduce imports, therefore, the duty for car engines over 1800cc has been increased to 20%, up from 10%.

The previous government had imposed a ban on the purchase of cars by non-filers, which has now been lifted as proposed in the latest budget. A majority of Pakistani population does not file taxes, therefore, the auto sales were affected to some extent because of the move. In a bid to increase tax revenues, the Finance Ministry has taken the decision.

While the taxpayers might be unhappy about the decision, some of the experts feel that the move will bode well for the government provided it devises means to persuade the non-filers to file their tax returns.

Smartphones Industry

The new government has imposed increased federal excise duty on expensive imported smartphones. This would mean an increase in the mobile phone prices as most of the in-demand smartphones dominating the Pakistani industry are imported.

The government has rationalized rates of regulatory duty (RD) on imports of different categories of low, medium and high price mobile phones in the Finance bill 2018-19.

This has been stated in the statement of the Federal Board of Revenue (FBR) released after the Finance Supplementary (Amendment) Bill, 2018. However, the FBR has not issued the exact rates of category wise mobile sets.

According to the sources, 5 to 10% duty is likely to be imposed on mobile imports, however, the matter will become clear after the issuance of a notification in this regard.

According to the FBR, the previous government had imposed a single rate of duty on import of a mobile phone irrespective of its price i.e. a basic unit (costing Rs 3,000-4,000) and a high-end smartphone (costing Rs 100, 000/-) both suffer the same incidence i.e. Rs 250/set.

Under the Finance Amendment Bill 2018, to rectify such inconsistencies, the regulatory duty structure on imports of mobile phones is being revised in an equitable manner.

Again, the focus is to reduce imports while focusing on increasing reliance on domestic products. In smartphones’ case, there aren’t many quality smartphone manufacturers in the country, however, the government had already hinted at making tough choices to support the crippling economy.

  • The idea behind the banning of purchase of expensive vehicles & property by non-filers was to increase the tax net. Means if you can afford to buy an expensive car / property you should become a filer and pay a bit of the tax. This was a nice idea to increase the tax net base, but has been abolished. Instead the existing tax payers are being squeezed more !!!!!

    • “While the taxpayers might be unhappy about the decision, some of the experts feel that the move will bode well for the government provided it devises means to persuade the non-filers to file their tax returns.”

      All IK has to do now is come on Screen and tell Pakistanis, please pax Tax, and they will start paying taxes. If we have such a simple method of persuasion, why bother with restrictions?

  • Paying taxes and filing returns are different things.

    The one who pays at source (salary etc.) does pay the tax, filing return or not does not matter. Salaried persons are the highest in number paying taxes. Businessmen always lie about their income.

    Secondly, what about indirect taxes like that on petrol, utility bills, GST etc.? Even a labourer earning 500 rupees a day is paying GST on a matchbox or pack of milk. Rich and poor being treated the same.

    @Leo and @College I 100pc agree. Govt. is now clearly an accomplice with auto mafia and property mafia. Their excuses are lame.

    There’s no difference between current and previous governments.

    • there is no difference in paying taxes and filling returns because the definition of tax payer is that you have filed a tax return. Doesn’t matter how much tax you have payed at source or otherwise, you are not a tax payer unless you file a return.

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