ISLAMABAD: Federal Board of Revenue (FBR) has issued explanation to amendment made to Federal Excise Act, 2005 through Finance Act, 2020.
The FBR through Circular No. 01 of 2020 dated August 06, 2020 explained the following amendments:
01. ENLARGING THE SCOPE OF SEIZURE AND CONFISCATION OF THE NONDUTY PAID ITEMS SUBJECT TO FED
In view of increasing trend of non-duty paid products and illicit manufacturing of excisable items and products, all products subject to Federal Excise Duty have now been made liable to seizure in case FED is not paid. Previously, the scope of such seizure was limited to cigarette and beverages sectors only.
Now, if any product which is subject to FED is seized on account of non-duty payment, that will also be subject to confiscation. Necessary amendments in sections 26 and 27 of 2005 Act have been made accordingly.
02. BOARD TO KEEP THE PARAMETERS OF AUDIT SELECTION CONFIDENTIAL
The provisions relating to confidentiality of parameters of audit selection were inserted in the income tax and sales tax statutes in earlier Finance Acts, but the same were missing in the 2005 Act. As a part of the Board’s drive for harmonization of various tax statutes, section 42B has been inserted in the 2005 Act.
03. OMISSION OF THE CONDITION OF AUDIT TO BE CONDUCTED ONCE IN THREE YEARS
The provisions relating to condition that audit cannot be conducted more than once in three years were omitted in other statutes, hence for the purpose of harmonization the same has also been omitted from the 2005 Act.
04. INCREASE IN THE RATE OF FED ON IMPORTED CIGARETTES AND OTHER SIMILAR PRODUCTS AND ELECTRONIC CIGARETTES
(i) FED on imported cigarettes, cheroots, cigarillos, cigars of tobacco and tobacco substitutes were fixed at 65% of the retail price.
However, there was no clear distinction between the locally produced cigarettes and the imported ones. To resolve the matter Sr. No. 8 has been substituted and imported cigarettes have been separated from the rest of the categories like Cigars, cheroots, Cigrillos of tobacco or tobacco substitutes. The duty on imported cigarettes has been substituted as 65% of the retail price or the rate of duty as prescribed at Sr. No. 9, of the First Schedule, whichever is higher.
(ii) At the same time, a separate Sr. No. 8b has been inserted for the rest of the categories like Cigars, cheroots, cigarillos and cigarettes, of tobacco and tobacco substitutes with duty defined as 65% of the retail price or ten thousand rupees per kg whichever is higher.
(iii) However, there was no duty prescribed for the E-liquids for which the rate has now been notified at Rs.10 per ml. A new Sr. No. 8a has been inserted for this purpose. Thus by charging FED on these liquids, the e-cigarettes or machines have been subjected to FED.
05. REDUCTION IN THE RATE OF DUTY ON CEMENT
The rate of FED on Cement has been reduced from Rs. 2 per kg to Rs 1.50 per kg. It is applicable on both import and local supply.
06. LEVY OF FED IN THE CASE OF 4×4 DOUBLE CABIN PICK UP
FED structure is already in place for both local and imported motor cars and SUVs excluding auto rickshaw falling under the PCI heading 87.03 i.e primarily passenger transport. However, double cabin pick up vehicles were still outside the ambit of FED despite being primarily used as passenger transport in the country. Keeping in view its usage as a passenger transport vehicle in Pakistan, it has now been brought in the ambit of FED @ 7.5% ad valorem in case of locally manufactured vehicles and @25% in the case of imported ones. However, the locally manufactured vehicles which have been booked on or before the 30th June 2020 will not be subject to FED, subject to the conditions as specified by the Board separately.
07. INCREASE IN THE RATE OF FED ON FILTER RODS
Filter rod is basic input material for cigarette manufacturing. Previously, rate of FED on filter rods was Rs 0.75 per filter rod. To enhance the effect of monitoring and discourage tobacco consumption, duty on filter rods has been enhanced to Re. 1 per filter rod.