ISLAMABAD: The Federal Board of Revenue has changed the tax collection mode on mobile phones to import stage for better recovery of taxes from the sector.

An official press release issued on Monday stated that the tax would be deducted at source from importers of mobile phones and would be passed on to the buyers.

He said that the sales tax collection would be Rs1,000 on import of smart phones and satellite phones. However, Rs500 would be collected on other phones.

The standard rate of sales tax under the Sales Tax Act 1990 is 16 per cent and prices of new mobile phones go as high as around Rs80,000 or more.

At the standard rate of sales tax, the amount of sales tax payable on a mobile phone costing Rs50,000 would be Rs8,000, but under SRO280(I)/2013 issued on April 4, the fixed sales tax is only Rs1,000, which comes to around two per cent.

The FBR maintained that no new tax had been imposed on mobile phones. The fixed amount of sales tax on activation stage was first introduced through SRO 390(I)/2001 issued on June 18, 2001, with a rate of Rs2,000 per mobile phone.

Under SRO 542(I)/2008 issued on June 11, 2008 the fixed rate was reduced to Rs500 per mobile phone, which was subsequently cut to Rs250.

The collection mechanism in all these notifications was based on the old CDMA technology, which required activation/energisation of mobile phones by the cellular service provider before the mobile phone could be operated. However, CDMA technology is no longer available in Pakistan and all mobile networks are operating on GSM technology.

Under GSM technology, only a Subscriber Identity Module (SIM) card is inserted in mobile phones which are ready for usage. These GSM technology-based mobile phones do not require activation/energisation by the cellular mobile network.

Due to this technology change the government exchequer was not getting the proper revenue from this sector as pre-activated mobile phones were being imported resulting in a steep fall in revenue despite tremendous increase in volume of import.

The SRO280 only aligns the law with the latest technology. This notification was necessitated to remove the anomalies occurring due to change in technology, the press release concluded.