Pakistani Consumer shift towards locally manufactured mobiles.

Due to the IMF program's strict conditions and the government's lack of reforms and lack of out-of-the-box solutions by government side, retained GST on assembled mobiles to 18% GST sales tax with their FY 2025 budget, and imported mobiles witnessed more of an increase in tax along with already having a 25% GST on imported mobiles; however, the government-imposed FED taxes on mobiles to increase revenue.

Telecommunication warned that it would be purchasing power of consumers and sales would decline, and the revenue will also see an impact. Overall, it is a chain, and if there is such a massive increase in taxes along with government-increased PTA taxes on imported mobile taxes as well, it will impact the overall supply chain and consumers as well. Moreover, the telecommunication sector warned that increasing taxes on IT products, like laptops, mobile devices, and computers, won’t solve revenue issues, and it will discourage consumers from buying these products.

GST Increased to 18% from 5% to 10% on laptops and mobiles

It is reported that there has been a sales drop on mobiles and laptops due to increased GST, high inflation, and an increase in taxes on the import side. Overall, it has had a negative effect on sales of laptops and mobiles. This is one of the reasons why FBR is witnessing a shortfall of revenues each month: because the budget was short-sighted, lacked vision, and had overambitious targets. Moreover, FBR's only focus is on advanced targets to sort out FBR's monthly projected targets. 
 

Mobile imports drop, and locally manufactured mobiles see a significant growth in sales.

According to the State of Pakistan, data shows that mobile imports saw nearly a 7.52% drop in imported mobile phones. This fiscal year, Pakistan imported mobiles worth USD 570.167 million during the first five months of this fiscal year. However, compared to the first five months of last fiscal year, mobile imports stood at USD 616.18 million, which is 7.52% more compared to this year's import figures.

Moreover, locally manufactured products witnessed growth in sales as the telecommunication sector manufactured 22.59 million units, and all were sold out. It is a very significant number; compared to last month (Jan to Sep 2023), the sales were only 1.17 million units. Moreover, this year, September alone did produce 2.15 million units compared to the same month last year, when it was only 0.07.

Moreover, the data shows that consumers are shifting to buy from imported products to local ones, and the trend must continue. However, these units are not high-end mobile phones, which elite IT sectors and freelance users buy. They would not buy these units because their work cannot be done on locally manufactured units.

Consumers shifting to locally manufactured mobiles is a good start. However, increasing taxes on luxuries does not only impact the IT sector, freelancers, and the elite, but it is also impacting the growth of IT exports, which could have been covered by mobile imports.

Pakistan's manufacturing would require a lot of reforms, which include technology transfer, subsidized electricity prices, reduction of taxes on industries, etc., because India has just begun the manufacture of iPhones, and it is after India’s continuous reforms and continuity of their industrialist growth policy. Therefore, FBR must decrease taxes on luxury mobiles so their tax revenue increases and IT exports can also see growth.