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FED on cigarettes to increase by 20pc in upcoming budget

FED on cigarettes to increase by 20pc in upcoming budget

ISLAMABAD: The Federal Board of Revenue (FBR) has decided to fix ambitious Federal Excise Duty (FED) target for documented cigarette industry for 2018-19 in view of policy decision to retain third tier (third slab) of FED on cigarettes in next fiscal year. Sources said on Monday that a very challenging FED target would be set for next fiscal year. At the same time, the target of FED would be enhanced for beverage industry with the proposal to raise FED on beverages. A third tier allowed for an increase in FED by almost 20 percent whereby revenue from government will go up from rupees 74 billion to more than rupees almost 94 billion.

As cigarettes remained top revenue spinner in terms of FED within the indirect taxes side, the revenue collection target to be assigned to the documented industry would be enhanced in 2018-19. Meanwhile, the FBR would fully equip tobacco squads of Inland Revenue Enforcement Network (IREN) with necessary equipment and infrastructure in budget (2018-19) to intensify its operations against locally manufactured tax-evaded cigarettes.

According to sources, the FBR has realized the importance of IREN with the retention of third slab of FED on cigarettes in coming budget. Government revenue has simultaneously benefited from two major actions of the government ie third tier of FED on cigarettes and actions of IREN against the non-duty paid cigarettes. This has realized the fact that both these policy measures must continue in 2018-19 to reduce non duty paid sector as it is stabilizing now.

The tobacco squads in the Regional Tax Offices need to be equipped with vehicles and other necessary equipment to continue to enforce actions in the next fiscal year. More than 1.6 billion cigarette sticks and raw material was seized in 2017 alone and about 8 illegal manufacturing operations closed down.

The IR Enforcement network needs full backing of the government to further increase its actions in the filed formations along with continuation of policy on cigarettes in next budget. Moreover, the government is expected to in increase funding to the IR Enforcement network to expand its operational jurisdiction to other territories, sources said.

The revised FED structure on cigarettes played a key role in increasing excise duty collection. As the federal budget for 2018-19 is on the cards, major focus of revenue generation on indirect taxes would be excisable commodities like cigarettes, services (international air travel), beverages, cement, natural gas and edible oils, etc.

The FBR has appreciated that there is a decrease in illicit trade of cigarettes on account of enforcement action of Inland Revenue (IR) Enforcement Network on illicit tobacco/cigarette trade and third tier/slab (FED) on cigarettes, which made duty structure under three tiers. But authorities realized that continuous steps in coming year are essential to fight against tax evasion in tobacco industry since this illegal sector is coming up with ways to create hindrances however the Government of Pakistan has vowed to fight against this black market.