The government has decided to increase Regulatory Duty (RD) on the import of cellular phones valuing $60 and above of any brands through the Finance Supplementary (Amendment) Bill, 2018 with an estimated collection of Rs 4.4 billion from this measure during 2018-19.
Following the Senate Standing Committee on Finance meeting, senior officials informed media that the government has proposed an increase in the rate of RD within the range of 10-20% on import of expensive mobile phones. Cell phones valuing less than $60 will be charged with Rs 250 RD as usual.
New Tax Slabs
Different slabs would be introduced for the imposition of the RD which include:
- Rs 250/ phone
- 10% RD for relatively expensive phones
- 20% RD for very expensive phones
The government has already presented the Finance Supplementary (Amendment) Bill, 2018 before the Parliament, however, the Finance Ministry is yet to submit the list of items on which the RD has been increased for 2018-19.
Talking to reporters, Federal Board of Revenue (FBR) Member Customs Zahid Kokhar said that higher duty would be imposed on the expensive cell phones.
Regulatory Duty on Luxury/Non-Essential Items
Zahid Khokhar further observed that the government decided to increase RD on luxury items at different rates with the objective to discourage imports.
We have made efforts to overcome trade imbalance and improve the balance of payment situation.
The government has imposed RD on 312 new customs tariff lines (5-20%) covering luxury and non-essential items and enhanced RDs (10-15%) on 295 existing customs tariff lines.
Through the Finance Supplementary (Amendment) Bill, 2018, the government has enhanced tax burden on some specific sectors like tobacco, vehicles and mobile phones, etc, and withdrawn some tax incentives given to businesses and individuals.
Why the New Duties?
According to the FBR, the RDs have been an effective tool in maintaining the stability of the current account position, competitiveness of the domestic manufacturing sector and promoting import substitution. To this end, the RD regime is being broadened to include additional luxury/non-essential items.
It is also the desire of the government to introduce fairness in its fiscal measures, especially with regard to items where both the rich and the poor are treated alike.
A glaring example of inequity is the 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 pay the same duty of Rs 250/set. To rectify such inconsistencies, the RD structure on imports of mobile phones is being revised in an equitable manner, the FBR added.