Economics & Business

FBR under pressure to reduce federal excise duty on cigarettes

ISLAMABAD: The Federal Board of Revenue (FBR) is facing immense pressure to reduce the Federal Excise Duty from Rs 1 to Rs 30 paisa per filter rod on cigarettes. According to press release issued here on Wednesday the FBR had imposed Federal Excise Duty @ Re 1 per filter rod on cigarettes which is adjustable, with a view to realizing revenue on sale of filter rods from unregistered and illicit manufacturers of cigarettes and to document the economy. Not only this, the board had also made it binding on the cigarette manufacturers to compile comprehensive production and sales data of filter rods to eliminate federal excise duty evasion.

The move had been widely hailed by the business community and cigarette manufacturers registered in the tax net given the fact that it had placed a permanent check on whether the filter rod manufacturers were accurately maintaining the data of their sales. The tax leakages in the cigarette manufacturing industry had been particularly plugged considerably after the cigarette manufacturers were also called upon to provide data, including raw material imported/purchased, number of filter rods manufactured, total number of filter rods available for consumption in cigarette manufacturing, filter rods sold in market, FED on filter rods sold and other information specified in the concerned Registers.

However, according to sources, the latest proposal by the FBR to slash the FED on filter rods is causing a great concern among the legitimate cigarette industry as it feels that the move may have been considered in the wake of pressure tactics being applied by the informal cigarette industry which was losing a chunk of its revenues earlier protected from the tax net.

The sources feel that if the informal cigarette industry is given this needless cushion and leverage, it could lead to major revenue losses to the FBR besides contributing to an unnecessary heartburn among the legitimate cigarette industry which regularly pays taxes but suffers losses in the market that is often flooded by cheap, substandard and smuggled brands produced by the informal sector.

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Mian Ahsan Liaqat

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