KARACHI: National Exchequer suffered a loss of Rs7.58 billion in last 16 months as the local mobile phone assemblers are misclassifying their imports to avoid imposition of sales tax and regulatory duty.
On the directives of Director Customs Intelligence and Investigation Karachi Irfan Javed, Additional Director Sheeraz Ahmed conducted a comprehensive study pertaining to the import of mobile phones parts and components.
Sheeraz Ahmed’s study found that PRAL data showed meager imports under PCT heading 8517.1277 (SKD of cell phones) showing payment of duty and taxes of Rs369.55 million. However, the Pakistan Telecommunication Authority (PTA) data shows that 20.27 million cell phones were imported and sold in Pakistan after assembly of imported components/parts.
Sheeraz Ahmed identified huge evasion of duty/taxes by way of misclassification, as components/parts of mobile phones were imported under PCT heading 8517.7000 (parts) instead of classifying the same in the correct PCT heading 8517.1211 (SKD) which was specifically created by the Government for local assemblers to classify mobile phones imported in CKD / SKD condition.
So far, 27 local assemblers have been authorized by Pakistan Telecommunication Authority (PTA) to run local assembly plants to assemble mobile phones after import of components/parts.
PCT heading 8517.1211 was specifically created to accommodate the local assemblers who import all components / parts of cell phones without using a single component / part that is manufactured locally, however, different companies adopted different modus-operandi to evade duty / taxes.
For instance, M/s Digicom (Q-mobile) used third parties like M/s Biz Master Trading (Pvt) Ltd which in turn hired another company i.e. M/s Ultimate Solutions and made imports in such a way that PCBs of mobile phones were imported by one company i.e. M/s Biz Master Trading (Pvt) Ltd, while other parts / components were imported by the other company i.e. M/s Ultimate Solutions to bifurcate imports between said companies to avoid classification in PCT heading 8517.1211 (SKD of mobile phones).
Other local assemblers made imports in their own name by importing mobile components / parts in piece-meals or by using commercial importers to avoid classification in PCT 8517.1211.
Another related area, being investigated, is the aspect of money laundering as mobile phone importers/assemblers declared suppressed values of imports at 1-3 US$ per mobile, while actual value of the same was 6-8 US$. Thus local assemblers massively undervalued their imports and transferred under-invoiced amounts through money laundering and huge foreign exchange was transferred by using means which need to be investigated.