The news: A new mobile device manufacturing policy has been approved by the Economic Coordination Committee ECC in Pakistan. The policy aims to encourage mobile manufacturing and assembly within the country and foster the local industries.
Mobile manufacturing in Pakistan: The ECC meeting to make decisions regarding this policy was held on May 21, and chaired by Advisor to Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh. Not only will the implementation of this policy be beneficial for associated local industries like packaging, but the arrival of high-end brands will allow indigenous manufacturers to become part of the global value chain as well. The policy also proposes research and development centers and the initiation of a new ecosystem for software applications.
Removal of taxes: Various suggestions were provided to the ECC for deliberation regarding the mobile phone manufacturing policy. Some of the measures that were approved included the removal of regulatory duty on completely knocked down/semi-knocked down (CKD/SKD) production of phones by PTA-approved manufactures. According to the policy, fixed income tax on CKD/SKD manufacturing of mobile devices up to $350 category will be abolished. However, there will be an Rs2,000 increase in fixed income tax on $351-$500 categories and Rs6,300 increase on the $500 categories. The fixed sales tax on CKD/SKD manufacturing of mobile phones will also be withdrawn. Locally assembled or manufactured phones will be exempted from the 4% withholding tax on domestic sales as well.
Misdeclaration and activation: Under the new policy, Pakistan Telecommunication Authority (PTA) will allow activation of device manufacturing in the country, under Input/Output Co-Efficient Organization (IOCO)’s import authorization in CKS/SKD kit (8517.1211) aa opposed to HS Code 8517.7000 i.e. parts. This will streamline the import of mobile phone parts and put an end to previously caused confusion and misdeclaration of parts. On the other hand, completely built units (CBUs) will be imported through agreed-upon routes after the settlement of all import duties and taxes implemented by the government in order to be activated until further amendments. Under 8517.1219, words “except smartphones” must be included for CBU imports in the category of up to $30, to avoid misdeclaration. The policy also resolved that a 3% Research and Development allowance will be given to indigenous manufactures for the export of mobile phones.
Government action: The government will commit to the maintenance of a tariff differential between CBU imports and CKS/SKD manufacturing until the policy reaches sits expiry. A roadmap has been included in the draft policy, according to which, the local manufacturers can ensure localization of parts and components of mobile devices. The Engineering Development Board will lead this sector, acting as the Secretariat of Mobile Phone Manufacturing Policy, and ensure that connected parts, components, and devices are available and being manufactured.