A very simple Federal Excise Duty (FED) structure for levying duty on cigarettes has been finalised by the Federal Board of Revenue (FBR). 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 two new slabs would be applicable on multinational companies and others following amendment to the Federal Excise Act, 2005. Sources told Business Recorder on Thursday that 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.
A new structure of the FED on cigarettes has been forwarded by the FBR to the Ministry of Finance for approval. According to the new slabs structure approved by the FBR, the rate of the FED would be 65 percent of the retail price where retail price exceeds Rs 50 for 20 cigarettes. The rate of the FED would be 25 paisa per each stick plus 50 percent of retail price where retail price does not exceed Rs 50 for 20 cigarettes. The new slab structure has been devised in such a manner to generate an additional amount of Rs 10 billion from the new FED structure on cigarettes, sources said.
Under existing slab structure, the slab number nine of the FED for cigarette industry is the upper tier slab. The slab number 10 for the cigarette manufacturers is the middle tier slab. The slab number 11 on cigarettes is the lower tier slab subjected to the FED. The slab number nine said that the rate of the FED would be 65 percent of the retail price on locally produced cigarettes if their retail price exceeds Rs 22 and 86 paisa per ten cigarettes.
The slab number 10 said the rate of the FED would be Rs 7 and 2 paisa per ten cigarettes plus 70 per cent per incremental rupee or part thereof on locally produced cigarettes if their retail price exceeds Rs 13 and 36 paisa per ten cigarettes but does not exceed Rs 22 and 86 paisa per ten cigarettes. The slab number eleven said that the rate of the FED would be Rs 7 and 2 paisa per ten cigarettes on locally produced cigarettes if their retail price does not exceed Rs 13 and 36 paisa per ten cigarettes.
A comparison of old and proposed slabs structure revealed that the new structure is very simple. All brands of cigarettes would fall under respective slab depending on retail price of cigarettes. The real potential of industry would be realised through this simplified slab structure.
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