The strict documentation and monitoring of the Green Leaf Threshing (GLT) units has resulted in maintaining complete record of actual sale of processed, unmanufactured tobacco to check tax evasion by local cigarette manufacturers.
Sources told Business Recorder here on Wednesday that the Federal Board of Revenue (FBR) policy of monitoring of the GLT units would continue in 2019-20. The FBR has issued SRO.1149 as part of the measures for strict monitoring of GLT units, which has not raised any tax on farmers of tobacco. The FBR's notification has also not made any restriction on the farmers under these SROs. The purpose of the notification is to document the buying and selling of tobacco to check evasion of taxes. For this purpose, the issuance of invoices of the tobacco being sold has been made mandatory for the GLT units.
The FBR has imposed Rs. 300 per kg on the sale of tobacco by the GLT units, which is an adjustable tax and is not applicable on farmers. The new procedure has been issued to enhance documentation, but it has not increased taxes on tobacco in anyway as it is an adjustable tax.
Some of the local cigarette manufacturers are pressurizing framers to protest against the documentation of GLT units in order to continue evasion of taxes on manufacturing of the cigarettes, sources said.
Prior to this procedure, certain cigarette manufacturers purchased excess amount of tobacco and declared less with the FBR and Pakistan Tobacco Board for evading taxes on cigarettes. The new system would enable the government to know about the exact amount of tobacco being purchased by the cigarette manufacturers.
Under the revised procedure, this tax is applicable on purchasers of processed tobacco. Tobacco cannot be used in cigarette manufacturing unless it is processed at the Green Leaf Threshing (GLT) unit. Whenever a manufacturer will send the tobacco to GLT for processing, a mandatory adjustable tax of Rs. 300 per kg is mandatory to be paid to the FBR along with the name of the manufacturer. The commissioner having jurisdiction shall post officers of Inland Revenue at the premises of GLT Units, whether working separately or as part of a cigarette manufacturing unit, for monitoring the receipts, processing, wastage, storage, issue of un-manufactured tobacco for sale, transfer or self-consumption. They shall also stamp and sign the tax invoice issued by the GLT units. The officers posted at the GLT units shall be responsible for framing a daily report of receipts, processing, wastage and issuance of tobacco and duty to be levied thereon to the concerned commissioner for reconciliation with monthly returns.
In case of contract processing or toll manufacturing by GLT units, the duty shall be charged at the rate as specified at serial 7 of the First Schedule to the Act and the same shall be shown on the tax invoice along with processing charges. The FBR has also imposed a bar on sale to inactive persons. A GLT unit shall not sell un-manufactured tobacco to any person who is not on Active Taxpayers' List maintained under the Act.
For cigarette manufacturing factories operating their own GLT, the FBR said that the cigarette manufacturing factories operating their own GLT units shall be required to issue invoices and pay duty as stipulated in Rule 82 and shall maintain separate invoice book, register of receipts, issue and balances as prescribed in Annex-II.
In case of exports of tobacco, zero rated invoices will be generated by the exporters at GLT units. It means that for export purposes, no tax will be paid and only documentation for the record purposes will be done.
Sources also added that all vehicles transporting un-manufactured tobacco shall be liable to carry a copy of federal excise invoice as evidence of chargeability of federal excise. The documents and requirements prescribed in the federal excise Notification No. SRO 217(1) 2010, dated the March 31, 2010 shall also be applicable, mutatis mutandis, to unmanufactured tobacco, along with additional requirement, as specified. The additional requirements shall also be applicable to cigarettes.
All these above restrictions and documentation barred the tax evading cigarette manufacturers from using any tactic through which they can evade tax, hence, they are resorting to their last tactic of using the farmers to protest against this applicable tax of Rs. 300 per kg. The truth, however, is that this tax is advance and adjustable and applied on manufacturers and does not hurt the farmers at all as can be seen from the law quoted earlier, sources added.
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