The Federal Board of Revenue (FBR) Sunday clarified that no new tax imposed on cell phones as is wrongly being portrayed by some quarters.

“The impression being created by certain vested interests that the government has levied a new tax on cell phone is baseless and devoid of fact,” said FBR statement issued here Sunday. It said that SRO 280(I)/2013 dated 04-04-2013 recently issued by the government does not impose any new tax, rather it only aligns the law with the latest mobile technology.

Giving details, the statement said that the fixed amount of sales tax on activation stage was first introduced through SRO 390(I)/2001 dated 18th June, 2001, with a rate of Rs 2,000 per cell phone and on the request of cellular company operators to encourage the sector, the rate was reduced from time to time.

Under SRO 542(I)/2008 dated 11 June, 2008 the fixed rate was Rs 500 per mobile phone, which was subsequently reduced to Rs 250 per mobile phone. The collection mechanism in all these notifications was based on the old CDMA technology, which required activation/energization of mobile phones by the cellular company operators before they could be operated.

The statement said that however, CDMA technology is no longer prevalent on any mobile network in Pakistan as all mobile networks in the country are presently operating on GSM technology and under this technology only a SIM card is inserted in mobile phones which are ready for usage.

Due to this technology change from CDMA to GSM, SRO 542(I)/2008 dated 11 June, 2008 had become redundant and the government exchequer was not getting the proper revenue from this sector as pre-activated cell phones were being imported resulting in a steep fall in revenue despite tremendous increase in volume of import.

SRO 280(I)/2013 dated 04-04-2013 recently issued by the government does not impose any new tax, rather it only aligns the law with the latest technology. The standard rate of sales tax under the Sales Tax Act, 1990 is 16pc and prices of new mobile phones go as high as around Rs 80,000 or more.

At the standard rate of sales tax, the amount of sales tax payable on a mobile phone costing Rs. 50,000 would be Rs. 8,000, but under SRO 280(I)/2013 the fixed sales tax is only Rs. 1000 which comes to around 2pc.Thus the fixed rate of sales tax under SRO 280(I)/2013 dated 04-04-2013 is still much lower than the standard rate of 16pc chargeable on all other goods.