The 2024‑25 federal budget introduced a new structure for sales tax on mobile phones, charging 18% GST on devices priced under US $500 (regardless of origin) and 25% GST on imported fully built units over US $500. Semi‑knocked down, fully assembled local devices still attract 18%. That means even modest smartphones now carry sizable tax burdens.
That fiscal change has major implications for consumers and the industry. By inflating prices on both imported and home‑produced devices, it restricts affordability—especially for low and middle‑income users. Nearly 40% of mobile users still rely on older 2G handsets, and for many, upgrading to 3G/4G devices becomes cost‑prohibitive. Platforms like ride‑sharing apps, gig‑economy jobs, and digital services rely on accessible smartphones, making the tax hike potentially damaging for livelihoods.
Manufacturers and telecom associations have sounded alarms, warning that the move could discourage local assembly and undermine investor confidence. While Pakistan currently assembles around 95% of its mobile phones locally, boosting export potential, inconsistent or punitive tax policy risks slowing production and shrinking export targets. Assembly volume reportedly dropped from about 3 million units to below 2 million after these taxes took effect.
Industry groups emphasize that while the government aims to meet revenue targets—partly under pressure from IMF loan requirements—the taxes may backfire. They argue that revenue collected from SIM‑based and telecom service taxes already contribute significantly, and extra handset GST places the burden unevenly on consumers.
For consumers, registering an imported personal device via PTA (with PSID and DIRBS process) can lead to unexpectedly high tax bills—sometimes exceeding 90% of the device’s declared value. Many users choose cheaper budget models or resort to unofficial workarounds, such as patched IMEIs or non‑PTA devices, further undermining formal compliance and reducing tax inflows.
Market dynamics are shifting. With high duties on imported phones, demand is pivoting to mid‑range local models. However, even local manufacturers pass on part of the tax burden, raising the entry‑level price ceiling. New brands find entry prohibitive, reducing competition and variety. Consumer choice narrows and price sensitivity increases.
In broader terms, the taxation strategy undermines Pakistan’s digital inclusion goals. It contradicts objectives laid out in its national ICT and economic transformation plans, which call for expanding digital access and export‑led growth in ICT goods. Heavy taxation on smartphones represents a regressive barrier—impacting students, freelancers, small businesses, and underserved rural communities most severely.
Conclusion
Pakistan’s revamped sales tax system on mobile phones aims to boost government revenue and support macroeconomic stability. Yet its rigid tax structure—especially high rates on lower‑price devices and full‑built imports—risks reducing affordability, encouraging grey markets, and stalling local manufacturing momentum. A more graded approach—such as phased implementation, exemptions for essential low‑cost models, or tax rebates for exports—could help preserve digital inclusion without sacrificing fiscal goals.
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