ISLAMABAD: The Federal Board of Revenue (FBR) is contemplating a proposal to achieve federal excise duty (FED) target from cigarette industry through an interim increase in FED rate on tobacco products during the last quarter (April-June) of current fiscal year 2013-14.
It has been learnt that the board is weighing up revenue implications of the changes in the duty structure on cigarettes in the last three months of 2013-14. While the board has also reportedly consulted two cigarette manufacturers for revision in the FED slabs for cigarette industry.
It is to be noted that in the budget for 2013-4014, specific two tiers duty structure was introduced by the FBR in consultation with the two large multinational cigarette manufacturers with the aim to raising excise duty revenue collection by 15 percent. However, the revenue collection has fallen short of the desired level in the first of the current year.
Market dynamics like excessive hoarding in the previous fiscal year has been blamed for the negative impact on FED collection from the tax compliant tobacco industry. In the fiscal year 2012-13 a total sale of 66.8 billion sticks helped the government amass revenue of Rs61.5 billion against expected revenue of Rs58.6 billion. Market sources claimed that hoarding in April-May 2013 was prompted by strong rumours that the FBR intended to introduce a heavy excise increase.
Another factor which has limited the FBR option is that sudden and exorbitant increase in cigarette prices that are higher than general inflation pushed consumers to cheaper cigarettes resulting in an increase in illicit trade. It is to be noted that Pakistan has witnessed an increase in the consumption of illicit brands since last few years.