Duty on mobiles serves as windfall for dealers
By IRFAN MALIK June 13, 2008 KARACHI - Mobile phone dealers and shopkeepers have started fleecing the consumers by charging additional amount ranging between Rs 500-700 on available stocks of mobile sets after the government imposed customs duty worth Rs500 on the import of mobile phones in the national budget, sources revealed to The Nation here on Thursday.
The dealers are charging extra amount on the sets on which they had not paid any duty thus minting millions just after one simple announcement in the budget. Bulk importers had predicted that the imposition of duty would encourage smuggling.
Dealers have pulled out of the market huge number of mobile sets a week ago after it was speculated that the government was to impose duty on the mobile sets in the federal budget. They withdrew from the market a huge bulk of sets in order to mint money if the speculation proved true. The government, as speculated, imposed levy on the sets and as soon as Federal Finance Minister Syed Naveed Qamar released the budget, the dealers began charging extra amount from the consumers. The mobile market shops located in Saddar before budget were overflowing with mobile sets but after its announcement the shops presented an empty look and there were hardly a few sets available at the outlets.
A mobile vendor at Sadder market, who wished not to be named, revealed that investors and dealers, who have opted for withdrawing available sets, were quite optimistic about the imposition of duty on mobile phones and knew that there was no chance of loss even if the government did not levy the tax. He said that investors and dealers had earned billions of rupees after the imposition of customs duty on mobile phones because they are charging extra money on the stocks on which they had not paid any duty.
He added that a friend of his in the business had bought mobile phones worth Rs 3.5 million two days before the announcement of budget in the hope that prices would go even more higher and now he had reaped huge profits because of his entrepreneurial courage. Soon after the announcement of budget, mobile phones disappeared from the city markets because shopkeepers had got the news that expected duty was being imposed. Almost all mobile dealers have displayed second hand set on their counters and buyers are being asked to pay additional amount worth Rs 500-700 on limited number of new sets available at counter.
While mobile sellers have withdrawn new sets from counters and only a few sets were available at their shops, it seems that they were expecting further increase in the prices in coming days. Interestingly, the dealers were selling used mobile phones at a premium rate.
"Imposition of Rs 500/set import duty on mobile phones would affect the formal trade of mobile phones in the country, which was flourishing amid rising demand from domestic consumers. We believe, Rs 500/set is not significant for expensive sets, however the levy would dampen the demand for low-priced sets below Rs 4,000," analysts said.
"Customs duty on import of mobile phones is unlikely to slow down subscriber growth given a large secondary market offering used and stolen mobile phones at low prices," they added.