LAHROE: Only three out of over 40 companies registered with the Pakistan Tobacco Board have installed the track and trace system which became operational from 1st July 2022.

These companies included Philip Morris Pakistan, Pakistan Tobacco Company and Khyber Tobacco, said Tariq Hussain Shaikh, Project Director of the Track & Trace System. He said that the T&T system would help to overcome huge losses from the four sectors - tobacco, sugar, cement and fertilizer.

The system has already been implemented in the sugar sector from Nov 23, 2021; for the crushing season 2021-22, registering an increase of around 34pc in terms of sales tax compared to the previous year. “The system has been implemented in the fertilizer and cigarette sectors from the start of the current fiscal year whereas it is scheduled to be implemented in the cement sector from October,” he said.

He said until and unless the system is implemented across the board, it will not help counter the massive tax evasion, especially in tobacco sector, where tax evasion amounts to Rs 80 billion per annum.

The FBR, in a letter issued on June 30, 2022, had directed all cigarette manufacturers to ban cigarette factories without tax stamps from 1st July, 2022, under the track and trace system. Nine cigarette manufacturers have challenged the FBR’s decision in court, arguing that affixing tax stamps on cigarette packets without installing a track and trace system violates sales tax rules.

For effective tracking of tax-paying cigarette brands, the FBR last year made branding licensing mandatory. Under the Sales Tax General Order 07/2021, existing and new manufacturers are required to register all their brands.

The law was introduced to curb the sale of illegal cigarette brands in the country. The scope of the law also includes Azad Jammu and Kashmir, but so far only 16 brands have been registered under the law.

Copyright Business Recorder, 2022