The Federal Board of Revenue (FBR) has proposed a revised minimum tax regime for wholesalers, distributors, dealers and sub-dealers of key consumer sectors under Clause 24D of the Finance Bill.
Many people are seeing reports that the government is increasing taxes on mobile phones. That is not exactly what the above-mentioned law says.
According to the proposed amendment, the minimum tax under Section 113(1) of the Income Tax Ordinance, 2001 will be set at 0.5 percent for distributors and supply-chain intermediaries dealing in:
This will not necessarily make things like mobile phones, food items and other electronics. Still, a small increase is possible.
Under the proposal, documented distributors and wholesalers of items like locally manufactured mobile phones, food material and fertilizers would pay a minimum tax of 0.5 percent on their sales (turnover).
If the proposal becomes law, you will not pay a new tax directly when buying a phone.
Mobile phone shops will not suddenly start charging a separate 0.5 percent tax to customers. However, distributors may face slightly higher tax costs than before.
Some businesses may decide to pass part of that extra cost to consumers through higher prices, while others may absorb the cost themselves to stay competitive.
The impact is likely to be small.
For example, on a phone worth Rs. 50,000, the difference between a 0.25% and 0.5% turnover tax works out to roughly Rs. 125.
The actual increase at the retail level could be lower, higher, or even zero depending on market competition and business climate.
The reduced tax rate will only apply if taxpayers are listed on the Active Taxpayers List (ATL) under both the Sales Tax Act, 1990 and the Income Tax Ordinance, 2001.
Section 113 of the Income Tax Ordinance imposes a minimum tax on turnover, meaning businesses must pay tax even if they report low or zero profits. It is designed to ensure minimum contribution from registered businesses regardless of profitability.
Official FBR budget documents and past Finance Acts show that this category was previously taxed at a lower reduced rate of around 0.25 percent in certain cases, particularly for documented supply chain entities meeting ATL and integration conditions.
The proposed change therefore reflects a doubling of the minimum tax rate for affected sectors.
Non-compliant entities are expected to be taxed at standard minimum tax rates under Section 113.