The Economic Coordination Committee (ECC) of the Cabinet has approved Mobile Device Manufacturing Policy in the meeting held on May 21, 2020. The fundamental purpose of this policy is to promote local manufacturing and assembly of mobile phone handsets in addition to ensure localization of the parts of the mobile phones. The Mobile Device Manufacturing Policy also encompasses indigenization of parts of mobile phone handsets which will promote allied industry including packaging.
The new policy will now be submitted to the Federal Cabinet for its approval. After approval, this policy will attract and incentivize high end brands to establish their factories in Pakistan. This policy is also important factor towards shrinking the current account deficit by slashing the yearly mobile phone import bill.
Main Features of Mobile Device Manufacturing Policy
The major points of the policy are as under:
- Removal of Regulatory Duty for Complete Knock Down (CKD) / Semi Knock Down (SKD) manufacturing by PTA approved manufactures under input/output Co-Efficient Organization (IOCO) approved import authorization.
- Removal of Fixed Income Tax on CKD/SKD manufacturing of mobile devices up to USD 350 category.
- Increase in Fixed Income Tax on USD 351-500 USD category by Rs 2000 and Rs. 6300 for exceeding USD 500 on CKD/SKD manufacturing only.
- Removal of Fixed Sales Tax on CKD/SKD manufacturing of mobile devices.
- PTA to allow activation of handsets manufacturing in the country under import authorization of inputs by IOCO in CKS/SKD kit (8517.1211) and not under HS Code 8517.7000 i.e. parts. This will eliminate mis-declaration in parts category at the import stage. Activation of Complete Built Up Unit (CBUs) imported through notified routes after payment of all levied duties and taxes as fixed by government from time to time shall continue till further amendment.
- In up to USD 30 category, words “except smart phones” to be inserted for CBU imports under 8517.1219.
- R&D allowance of 3% to be given to local manufactures for exports of mobile phones.
- Exemption from 4% withholding tax on domestic sales for locally assembled / manufactured phones .
- Government to commit maintaining tariff differential between CBU imports and CKS/SKD manufacturing till the expiry of the policy.
- Local industry to ensure localization of parts and components as per road-map included in draft policy.
- Engineering Development Board (EDB) to act as Secretariat of Mobile Phone Manufacturing Policy and ensure development of allied parts, components and devices.
Mobile Phone Import Bill
Pakistan’s mobile phone import bill has significantly fattened in the current fiscal year. In the first 9 months of the current fiscal year, mobile phones valuing USD 811 million have been imported. While import bill of phones remained USD 596 million during the last fiscal year. A graphical representation of mobile phone imports during last five years is below :
During the last year, the government introduced Device Identification, Registration and Blocking System (DIRBS). The objective was to ensure use of legal devices on the mobile networks. DIRBS also makes sure that only approved and legal devices are operational over mobile networks in Pakistan. It also acts as a catalyst in eliminating smuggling of mobile phones into Pakistan.
