'Budget a non-event for telecom sector' -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

‘Budget a non-event for telecom sector’

Hina Mahgul Rind

KARACHI: The budget for 2011-12 carried nothing for the local telecom sector as taxes remained unchanged, said an analyst.

Mohammad Millwala, telecom analyst at Topline Research, said that there is status quo for the telecom sector as GST on telecom services stays unchanged at 19.5 percent.

The government has set a target of around Rs75 billion from the issuance of 3G licences. Keeping in mind, the limited market of the 3G, the cellular companies will remain hesitant to acquire 3G license from the government, he said.

Cellular operators said that the GST on telecom sector has not been slashed.

Cellular companies had proposed to the government to reduce GST to 17.5 percent.

The activation tax on new SIMs has not been reduced in the budget. Cellular sector had proposed to the government abolition of SIM activation charges.

With reduction of activation tax, mobile phone operators would be keen to introduce their connections in rural areas, an official of a cellular operator said.

He said that the tax environment in Pakistan is not business-friendly as the tax on cellular industry is high for operators and users alike, making business and communication very expensive as compared with regional countries.

In the automotive sector, regulatory duty remains intact at 50 percent on import of used and new CBUs of 1801cc and above. Duty structure of CKDs remains the same. There are no changes in withholding tax on car purchase.

Special excise duty (SED) which was being collected at the rate of 2.5 percent has been completely removed and GST has been reduced by one percent on automobiles sales from 17 percent to 16 percent.

The abolition of SED on cars will have positive impact on the auto sector and will improve the sales volume of the local manufacturers, said Furqan Punjani, an analyst at Topline Research.

Some of its impact will also be transferred to the end consumer and the prices of will be reduced by two to three percent, he said.

Atif Zafar, an analyst at JS Research, said that the proposal to revise the import duty on 12 auto parts to 50 percent from 32.5 percent was not made part of the budget. These parts include engine, alternator, starter and fuel pump, the major components of any vehicle.

Zafar also said that reduction in the GST by one percent and removal of 2.5 percent SED would help improve the sales and the prices would decrease by 3.5 percent.

H M Shahzad, Chairman All Pakistan Motor Dealers Association (APMDA), said that there was nothing in the budget for the used car importers. “We had proposed to increase the depreciation rate to two percent on used vehicles as importers are already paying regulatory duty at the rate of 50 percent. Commercial import of used cars should have been allowed.” He said that he expected the trade policy to meet the car dealers’ demand.
Source: The News