Industry

Cigarettes Manufacturers to Pay Advance Excise Duty, Not Farmers

Karachi, September 02, 2022: Newly imposed advance excise duty on tobacco purchase will not impact farmers but manufacturers and would dent the massive tax theft in the tobacco sector.

Tax evaders are pressurizing the FBR through farmers for withdrawal of this major documentation measure and creating a false impression of farmers being taxed.

Recently, Khyber Pakhtunkhwa Farmers Rights Protection Association (KPFRPA) has opposed the advance excise duty and wrongly associated it with farmers.

Spokesperson of FBR clarifies that, “FED on un-manufactured Tobacco has been enhanced from Rs 10/per kg to Rs 390/per kg w.ef 23.08.2022, through promulgation of Tax Laws (Second Amendment) Ordinance,2022, in terms of S.No 7 of Table 1 of First Schedule to the Federal Excise Act 2005.”

He added that the FED is chargeable on unmanufactured Tobacco for manufacturers of cigarettes by the Green LEAF Threshing Units (GLT Units) after processing and conversion of tobacco green leaf as defined under sub-section (2A) of section 2 of the Federal Excise Act 2005.

He said that the amount of FED is adjustable in terms of section 6 of the Federal Excise Act 2005, from the amount of duty collected. Therefore, the main purpose of imposition of FED on unmanufactured tobacco is the documentation dormant undocumented segments of Tobacco industry.

Furthermore, he added that no FED is imposed or chargeable on raw tobacco leaf supplied by the tobacco growers/farmers to the GLT Units.

Experts believe that the imposition of advance excise duty has been instrumental in documentation of the purchase of tobacco by manufacturers of cigarettes and other tobacco products as all manufacturers who purchase tobacco from farmers must process tobacco through GLT plants.

It is pertinent to mention that the previous government had increased the tax on tobacco from Rs. 10 per kg to Rs. 300 per kg, however, it had to retract the decision due to pressure from lobby sitting in power corridors, related to illegal cigarette producers.

The government must take a strong stand on this decision. Otherwise, it may help the rise in illicit trade as it will once again give these illegal manufacturers the opportunity to hide their actual tobacco purchases and channel the unlawfully gained revenues from this evasion into marketing and fiscal violations.

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