Revision of FED slabs: Cigarettes makers'' proposal now part of Presidential Ordinance

The cigarette manufactures have succeeded in incorporating the proposal of their choice in the Presidential Ordinance for revision of Federal Excise Duty (FED) slabs on cigarettes. Sources told Business Recorder on Tuesday that the cigarette manufacturing units have managed to get their own proposal approved in the Finance Ordinance.
This will allow them to raise prices and increase their own profits without adding any substantial revenue to the government. The original proposal of the Federal Board of Revenue (FBR) dully approved by the Ministry of Finance has not been made part of the Presidential Ordinance. It is yet not clear their how an entirely a new proposal of the cigarette industry has been made part of the amendments to be made in the tax laws through the Finance Ordinance.
As a result of the FBR''s proposal, the rate of the excise duty would correspondently increase with the increase in the prices of the cigarettes. This would increase FED collection from the commodity. The FED rates gradually move up with the correspondent increase in the retail price of cigarette. On the other hand, as per new proposal of cigarette manufacturers, the rate of the FED on cigarettes has been fixed. If the prices of cigarettes would increases or decreases, the rate of the FED would not revise due to fixation of the excise duty. The fixed rates of the FED as proposed by the manufacturers have been incorporated in the Presidential Ordinance.
The draft of the Presidential Ordinance on taxation measures to be issued revealed amendment in the First Schedule of the Federal Excise Act, 2005 to revise FED slabs on cigarettes. According to the revised FED structure submitted by the cigarette manufactures to the FBR, the rate of the FED would be Rs 2325 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price exceeds Rs 2286 per thousand cigarettes. The rate of the FED would be Rs 880 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price does not exceed Rs 2286 per thousand cigarettes, draft of the Presidential Ordinance said.
The said revised FED slabs on cigarettes have been dully incorporated in the Finance Ordinance to be issued for implementation of the new taxation measures. Contrary to this, the FBR has got approval from Ministry of Finance of entirely different FED structure on cigarettes. The approved proposal has estimated to collect Rs 12 billion from cigarette manufactures. As per FBR''s proposal, under first proposed slab, if retail price exceeds Rs 50 for 20 cigarettes, rate of the FED would be 65 percent of the retail price. The second proposed slab reveals that if retail price does not exceed Rs 50 for 20 cigarettes, the rate of the FED would be 25 paisa per stick plus 50 percent of retail price. The existing three slabs have been proposed to be replaced with two slabs of the FED on cigarettes. The existing upper-tier slab, middle-tier slab and lower-tier slab have been merged into two simple slabs of the FED.
Sources said that the FBR had proposed a very simple Federal Excise Duty (FED) structure for levying duty on cigarettes. This proposal was dully approved by the Finance Ministry for revision of the FED slabs on cigarettes. However, a new proposal was recently floated by the cigarette manufactures which was incorporated in the Presidential Ordinance. The new proposal has been added in the Finance Ordinance due to unknown reasons as the FBR''s original proposal has estimated to collect Rs 12 billion from the cigarette industry. The new proposal of the industry has also estimated Rs 12 billion from revised slabs but experts opined that the revenue might be much less as estimated by the cigarette manufacturers. The two proposals are entirely different. The FBR''s proposal has merged upper-tier slab, middle-tier slab and lower-tier slab have been merged into two simple slabs of the FED. Whereas the new proposal of cigarette manufacturers has replaced the existing serial number nine and ten of the First Schedule of the Federal Excise Act, 2005. The last slab number 11 of FED has been proposed to be abolished by the cigarette manufactures. The method of revision of the FED on cigarettes is also very different when both the proposals are compared, they added.