The Federal Board of Revenue (FBR) has rejected a proposal of cigarette manufacturers of Mardan to abolish Federal Excise Duty (FED) of Rs 10 per kg on the un-manufactured tobacco in the upcoming budget (2012-2013). Sources told Business Recorder here on Friday that the issue was discussed during the last meeting of the FBR with the cigarette industry at the FBR House.
In the previous budget (2011-2012), the FED on un-manufactured tobacco was enhanced from Rs 5 per kg to Rs 10. Local manufacturers argued that the excise duty was causing problems for tobacco growers and it should be abolished in the budget (2012-2013). Responding to the proposal, FBR officials informed the local manufacturers that the FED of Rs 10 per kg on the un-manufactured tobacco has been imposed after processing of the item from GLT units which had nothing to do with the growers. "How will the FED on un-manufactured tobacco hurt growers when they are not liable to pay the same?" tax officials said.
Moreover, tax officials also said that the FED had not been imposed on the un-manufactured tobacco as a revenue generation measure, but for the documentation of the economy. The revenue collection in this regard was negligible but the tax department knew about units where the same had been supplied for manufacturing of cigarettes. With the help of this measure, the tax department has necessary information about the units to whom the tobacco has been sold. This helps the tax department to ascertain the number of cigarettes manufactured from the un-manufactured tobacco.
At the same time, the facility of the adjustment is also available to the persons engaged in payment of FED on un-manufactured tobacco. If local units are ready to give some alternative proposal for documentation of the supply chain, the FBR can consider the proposal. Otherwise, this documentation measure would not be abolished.