FBR estimates Rs20 billion annual revenue loss in illicit tobacco trade

ISLAMABAD: Federal Board of Revenue (FBR) has estimated around Rs20 billion as revenue loss due to illicit trade of tobacco products.

The FBR on Tuesday said that the tobacco sector in Pakistan contributed significant revenue in 2018-2019 amounting to Rs 117 Billion (Rs 90.854 billion FED and Rs. 26.147 Billion sales tax).

However, Pakistan is also facing problem with the illicit trade in tobacco products, which includes undeclared local production, smuggling of tobacco products of foreign brands and counterfeit production. “The illicit trade in tobacco products costs Pakistan more than Rs. 20 billion a year,” the FBR said.

In order to prevent leakage of revenue, under-reporting of production and sales of tobacco products and to ensure proper payment of FED and Sales Tax on the manufacture and sale of tobacco products, the FBR is mandated to licence the implementation of a track and trace system; which is to be developed, operated and maintained by the licensee for tobacco products manufactured in and imported into Pakistan.

To this end, the FBR is inviting applications for grant of licence to be issued under the Sales Tax Rules of 2006 for the development, maintenance and operation of track and trace system in accordance with the provisions of the rules and the instructions specified herein below.

The successful applicant in compliance with SRO 250(I)/2019 dated 26.02.2019 shall implement a track and trace system, including high security tax Stamps/Markers/Codes which includes unique, secure and non-removable identification markings (hereafter referred to as unique identification markings) combined with state-of-the-art electronic monitoring and tracking systems, for the purpose of protecting existing revenue and to facilitate the generation of further revenue streams through the effective reduction of the illicit trade of tobacco products in Pakistan.

The FBR said that Pakistan ratified the Framework Convention on Tobacco Control (FCTC) on 3rd November 2004 and acceded to the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products on 29th June 2018. Article 8.2of the FCTC Protocol requires Pakistan to establish a tracking and tracing system, to be controlled by Pakistan, for all tobacco products that are manufactured in, imported into or transiting through its territory.

Pakistan has to embark on a project to implement a track and trace system for tobacco products to meet its national need to monitor and protect its revenues and address the high level of illicit trade within its borders, and to meet its international obligations under FCTC to implement a track and trace system that can form part of a regional and/or global international track and trace regime for tobacco products.

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