Imported High-End Phones to Get Higher Tax Rates in Upcoming Finance Bill

Fixed amount of sales tax would be replaced with the standard rate of 17 percent sales tax on certain categories of phones.

The policy has been incorporated in the Supplementary Finance Bill 2021, which is to be approved by the National Assembly.

In this regard, mobile phones have been divided into two broader categories.

The first category would cover those mobile phones having import value up to USD 200-250. The second category would include cellphones with a value of above USD 200-250. The sales tax table would be revised under the Sales Tax Act 1990 by placing all kinds of phones in two categories based on their import value in completely built condition (CBU), semi-knocked down (SKD), or completely knocked down (CKD) condition.

Presently, mobile phones are divided into seven categories. These cellular mobile phones or satellite phones are charged on the basis of import value per set, or equivalent value in rupees in case of supply by the manufacturer, at the rate as indicated against each category as per Ninth Schedule to the Sales Tax Act 1990.

Sales tax is charged on the import of mobile phones in the CBU condition at the time of import or registration (IMEI number by CMOs). Sales tax is charged on the import of mobile phones in CKD/SKD condition, and sales tax is charged on the supply of locally manufactured mobile phones in CBU condition.

In extension, Sales tax is charged at Rs. 10-130 to Rs. 9,270 per phone, depending on its import value. For example, Rs. 1,680 fixed amount of sales tax is applicable on the import of mobile phones (CBU condition), where value is exceeding USD 100 but not exceeding USD 200.

Similarly, a fixed amount of sales tax of Rs. 1,740 is applicable on the import of cell phones (CBU condition) where the value is exceeding USD 200 but does not exceed USD 350. Additionally, sales tax of Rs. 5,400 is chargeable on the import of mobile phones in CBU condition exceeding the value of USD 350 but not exceeding USD 500. A fixed amount of sales tax of Rs. 9,270 has been collected on the import of mobile phones in CBU condition exceeding the value of USD 500.

The government’s new policy of taxation on mobile phones is to levy the highest rate of 17 percent sales tax on the import of mobile phones with a value above USD 200. The 17 percent sales tax would be applicable on the import of cellular mobile phones in both the CKD/CBU form. Whereas, the existing lower sales tax rates on the import of mobile phones up to USD 200 would not be changed.

Therefore, cell phones having a value below USD 200 would continue to be charged on the existing rates of mobile phones under the Sales Tax Act.