Pakistan proposes new tariff structure to boost mobile device manufacturing

ISLAMABAD (Zubair Kasuri): The Engineering Development Board, under the Ministry of Industries and Production, has released a budget proposal outlining new tariff structures for the Mobile Device Manufacturing and Export Policy (MDMEP) 2025-28.

The proposal aims to revise the existing tariff structure for both Completely Built Units (CBU) and Semi Knocked Down (SKD)/Completely Knocked Down (CKD) mobile phones, as well as introduce cascading tariffs for various mobile phone components.

Current Tariff Structure

Currently, the tariff structure for CBUs (mobile phones) under HS Codes 8517.1390 and 8517.1419 varies based on the Cost, Insurance, and Freight (CIF) value. For instance, smartphones with a CIF value not exceeding US30 are subject to an 18% sales tax, a 300 CPT levy, 100 RD, and a 100 WHT.

Tariffs increase with the CIF value, with phones exceeding US$ 700 facing a 25% sales tax, a 22,000 CPT levy, 16,000 RD, and an 11,500 WHT.

The existing tariff structure for SKD/CKD mobile phones under HS Codes 8517.1310 and 8517.1411 also includes an 18% sales tax at import, with varying levies based on CIF value.

Proposed Tariff Changes

The MDMEP 2025-28 proposes significant changes to these tariffs. Notably, there are suggestions to revise tariffs on components such as chargers, batteries, and tablets to provide a margin advantage to CKD/SKD assembly over CBU imports.

For example, the proposal suggests increasing the duty on mobile phone chargers in CBU condition from 11% CD (4.17% under the China FTA) to 20% CD (15% RD on China FTA). Conversely, duties on various components in kit form are proposed to be reduced to 0% to promote local assembly.

Cascading Tariff Structure

A key feature of the MDMEP 2025-28 is the introduction of a cascading tariff structure for mobile phone components. This involves reducing duties on components as they move further down the manufacturing process. The aim is to incentivize local manufacturing and assembly of mobile phones and their parts.

For example, the proposal includes reducing the duty on charging ports, charging flex cables, power ICs, and other charging system components to 0%.

Similar reductions are proposed for audio components, battery components, camera components, display assemblies, USB cables, and other parts.

These proposed tariff revisions are intended to benefit consumers, the local industry, and the government. The policy aims to encourage local production, reduce reliance on imports, and potentially lower the cost of mobile devices for consumers.