GST on High end phones increased to 25% – How it will affect mobile phone market?

In yet another move to counter economic instability, the government of Pakistan has raised the general service tax (GST) from 18% to 25% on a number of goods. These include high-end mobile phones, decor items, imported food, and other luxury items. The GST was also imposed on three categories of locally manufactured/assembled items as well. The step is taken to meet the IMF demands so the lender can disburse the next tranche of the billion-dollar loan program. The Federal Board of Revenue (FBR) issued SRO297 of 2023 to implement the final portion (increasing GST) of the Rs170 billion tax revenue measures.

How the Increase in GST can affect the mobile phone market?

A 25% Goods and Services Tax (GST) can significantly affect mobile phone sales.

Detrimental Effect on Mobile Phone sales:

The increase in the tax can increase the price of mobile phones for consumers, which can have a detrimental effect on sales.

Preferring low-end models:

Many consumers may be unwilling to pay the higher price for a mobile phone, opting instead to delay their purchase or choose a less expensive model.

New pricing strategy for retailers:

In addition, the increase in the GST may have an effect on the profit margins of mobile phone manufacturers and sellers, who may need to change their pricing strategy to account for the tax hike.

An increase in GST may also impact the import and export of mobile phones. The increase in taxes may make it more expensive for local manufacturers to import mobile phone parts into the country. The local mobile industry is already facing a tough time as the production of mobile phones is halted owing to the import restriction and the imposition of new taxes will further exacerbate the situation.

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