PTI govt approves mobile phone manufacturing policy

Aims to encourage domestic production to counter security threat

Shahbaz Rana May 21, 2020
An AFP file image.

ISLAMABAD: The federal government on Thursday approved the first mobile manufacturing policy aimed at encouraging local production to counter the security threat emanating from handsets being manufactured in India.

The Economic Coordination Committee (ECC) of the cabinet approved the Mobile Device Manufacturing Policy to promote local manufacturing and assembly of mobile handsets, according to a statement issued by the Ministry of Finance. Under the policy, tax rates for high-end mobile sets have been increased while tax rates for low-end handsets have been either reduced or eliminated.

The ECC, for the second time, rejected a proposal of the Ministry of National Food Security and Research that asked the cabinet body to fix the cotton intervention price.

The mobile phone manufacturing policy would ensure “localisation and indigenisation of parts of mobile phones”, said the finance ministry.

“The country faces a serious security threat as there is a growing concern of Indian-manufactured smartphones using other countries’ Type Allocation Code within the initial eight-digit portion of the 15-digit International Mobile Equipment Identity (IMEI) used to uniquely identify wireless devices,” said the information technology ministry.

It may be technically very difficult for Pakistani authorities to identify and restrict the import of Indian assembled/manufactured smartphones with other countries’ IMEI numbers, it added. Samsung is currently operating the world’s largest mobile handset factory in India.

Under the Mobile Device Manufacturing Policy, parts of mobile handsets will be used in the entire range of mobile handsets produced in Pakistan instead of being limited to a particular model. The policy will have a positive impact on allied industries including packaging and plastic. The expected manufacturing of high-end brands would give the domestic industry an opportunity to become part of the global value chain, said the finance ministry.

Tax incentives

The ECC approved the removal of regulatory duty charged on the import of completely and semi-knocked down (CKD/SKD) manufacturing devices by Pakistan Telecommunication Authority (PTA)-approved manufacturers under the Input/Output Co-Efficient Organisation (IOCO)-approved import authorisation. The ECC approved the abolition of fixed income tax of up to Rs1,740 per handset on the CKD/SKD manufacturing of mobile devices having an import value of up to $350.

However, it increased the fixed income tax on the $351-500 category handsets by Rs2,000 or 37% to Rs7,400 per set. Similarly, the mobile sets having an import value of more than $500 will be subject to an additional Rs6,300 or 68% income tax, bringing total per handset income tax to Rs15,570.

The ECC approved the removal of a fixed sales tax on the CKD/SKD manufacturing of mobile devices.

PTA will also allow activation of handset manufacturing in the country under import authorisation under the special category to eliminate misdeclaration in the parts category at the import stage.

The activation of completely built units (CBUs) imported through notified routes after payment of all levied duties and taxes, as fixed by the government from time to time, will continue till further amendment.

The government also approved a research and development allowance of 3% for local manufacturers on the export of mobile phones. The locally assembled and manufactured phones will be exempt from a 4% withholding tax on domestic sales.

The government will maintain tariff differential between CBU imports and CKD/SKD manufacturing till the expiry of the policy. The domestic industry will ensure the use of local parts and components as per the road map in the draft policy.

Cotton intervention policy

The ECC again rejected the food security ministry’s summary, asking the government to fix the cotton intervention price. After the first rejection, the food ministry got the decision reversed from the federal cabinet that set up a committee to review the decision.

The ECC considered a proposal brought forward by the Ministry of National Food Security and Research for an intervention price for the cotton crop of 2020-21 by rationalising earlier proposals after fresh consultation with the stakeholders, said the finance ministry.

Members of the ECC had an in-depth discussion on the matter and maintained that effective and sustained support to cotton growers was vital and necessary due to the importance of cotton for the domestic as well as an export industry.

“However, such support should be extended in the form of directly targeted subsidy to the farmers. The ECC directed the Ministry of National Food Security and Research to bring to the ECC proposals for promoting research and development and improving seed quality and yield per acre,” according to the finance ministry.

The ECC decided that since the matter was not federal in nature, a mechanism should also be adopted by the Ministry of National Food Security and Research to engage with provincial governments, particularly Punjab, it added.

Published in The Express Tribune, May 22nd, 2020.

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