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The GST on high-end phones has been increased to 25% – What effect will it have?

There has been yet another move by the government of Pakistan to countereconomic instability, as it has increased the general service tax (GST) from 18% to 25% on a number of products. Among them are high-end mobile phones, high-end decor items, imported foodstuffs, and other items that are regarded as luxury. As well as three categories of locally manufactured/assembled products, the GST was also imposed on three categories of imported goods. The step is taken to meet the IMF demands so the lender can disburse the next tranche of the billion-dollar loan program. To implement the final portion of the Rs170 billion tax revenue measures approved by the Federal Board of Revenue (FBR), the FBR issued SRO297 of 2023 to implement an increase in GST.

Is the increase in GST going to affect the mobile phone market in any way?

There is evidence that a 25% Goods and Services Tax (GST) can have a significant impact on the sales of mobile phones.

Detrimental Effect on Mobile Phone sales:

Increasing the tax on mobile phones can have an adverse effect on the sales of these devices, as consumers will be forced to pay more for them, which can lead to increase in prices.

Preferring low-end models:

In some cases, the consumer may want to delay their purchase of a mobile phone in order to avoid paying the higher price, or they may select a cheaper model rather than paying the higher price.

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New pricing strategy for retailers:

Furthermore, the increase in the GST could have a detrimental effect on the profit margins of mobile phone companies and sellers, who may need to adjust their pricing strategies as a result of this tax increase.

It is important to keep in mind that an increase in GST may also have an impact on mobile phone imports and exports. In addition to the increase in taxes, the manufacturers may also have trouble importing mobile phone parts into the country due to the increase in taxes. As a result of the import restriction, the local mobile industry is already having a hard time as they are unable to manufacture mobile phones and the imposition of additional taxes will further exacerbate the situation.

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