Taxation structure on cigarettes still lowest in region: FBR

Taxation structure on cigarettes still lowest in region: FBR

ISLAMABAD: The Chairman of the Federal Board of Revenue (FBR), Asim Ahmad has said that the taxation structure on cigarettes is still the lowest in the region and does not meet the World Health Organization (WHO) criteria.

While briefing Senate Standing Committee on Finance on Wednesday, Asim Ahmad, stated that the government has increased the Federal Excise Duty (FED) on cigarette brands of multinational companies compared to local brands, which is intended to protect the local tobacco industry.

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He stated that the taxation structure on cigarettes is still the lowest in the region and does not meet the World Health Organization’s (WHO) recommended indirect taxation of 75 percent of the retail price of tobacco.

Three companies have fully implemented the track and trace system, while 1-2 more companies have signed an agreement with the FBR for installation of the system. The matter was in litigation at the Islamabad High Court (IHC), but the stay has been vacated, and now the remaining companies would install the track and trace system at their manufacturing premises.

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He added that efforts to combat smuggling have been reinforced, resulting in 811 seizures and the confiscation of 61 million sticks of smuggled cigarettes during 2022-23. Ahmad clarified that the government has not made a major increase in the Tier-II slab of the FED, which covers low brands of cigarettes.

To prevent the shifting of manufacturing units to the Azad Jammu and Kashmir (AJK) territory to avoid taxes, the FBR and tax authorities of AJK have signed an agreement on the exchange of information. The AJK government has also decided to implement the track and trace system at the manufacturing units located at the Azad Kashmir.

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According to Asim Ahmad, the FBR chairman, the government has not made a major increase in the Tier-II slab of the FED, which covers low brands of cigarettes. However, there has been a significant increase in the FED on cigarettes manufactured by multinational companies.

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For cigarette brands of multinational companies, if the locally produced cigarettes’ on-pack printed retail price exceeds Rs 9000 per 1000 cigarettes, the rate of federal excise duty would be Rs 16,500 per thousand cigarettes. On the other hand, for local brands, if the on-pack printed retail price does not exceed Rs 9,000 per thousand cigarettes, the rate of the FED would be Rs 5,050 per thousand cigarettes.

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