The government has no intention to completely abolish federal excise duty (FED) on all excisable commodities/items in the budget (2012-13) whereas FED would be slashed on cement and beverages under the policy to gradually phase out the excise regime. Sources told Business Recorder here on Friday that the income tax, sales tax, customs duty and the federal excise duty would continue in the fiscal (2012-13).
Keeping in view the serious revenue implications, it is not practically possible to abolish the FED on all items under the relevant schedule of the Federal Excise Act 2005. However, the government is expected to reduce FED on a few items, however the excise regime would continue to operate in next fiscal (2012-13).
It is out of question to suddenly abolish the FED regime having serious revenue impact on the FBR's budgetary projections set by the government. At the time of announcement of budget (2011-12), the government had estimated generation of around Rs 165 billion on account of federal excise duty (FED) during 2011-12. Prior to 2011-12, the receipts from federal excise duty were budgeted at Rs 153 billion for 2010-11. Later, the FED target was slashed to Rs 139 billion for current fiscal year (2011-12). So far, the FBR has collected approximately Rs 100 billion during 2011-12. Taking into account revenue implications, how the FBR would be able to meet the target for next fiscal year in case the FED is being abolished on all items.
Sources said Finance Minister Abdul Hafiz Sheikh has rightly said that government would continue with the policy of phasing out of federal excise duty in coming budget. In last budget, the FED was abolished on many commodities and the same policy would be followed in coming budget. The FED would be further abolished on a few more items and completely abolished on all the items in next 2-3 years.
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