Chairman Federal Board of Revenue (FBR) Tariq Bajwa said on Friday that the government will raise Federal Excise Duty (FED) up to 70 percent on cigarettes in line with the standards set by World Health Organisation (WHO) in phase-wise manner. He informed the Senate Standing Committee on Finance chaired by Saleem Mandviwalla here on Friday that the FBR has raised FED from 55 to 58 percent in 2014-15.
Average tax incidence on cigarettes has now been increased from 58% to 63% in budget (2015-16). The FBR is committed to raise the FED on his item as per benchmarks set by the WHO. We are moving in this direction to maximize the rate of the FED on cigarettes. He assured the committee that the FED on cigarettes would be raised to 70 percent in line with the WHO recommendations.
Chairman of the committee Saleem Mandviwalla asked FBR Chairman to explain reasons for issuance of SRO.481(I)/2015 for increasing incidence of FED on cigarettes from June 6 2015 before approval of the federal budget. People will go to courts to challenge imposition of taxes before approval of the budget.
FBR Chairman informed that shopkeepers etc have started selling cigarettes costly at the arrival of the federal budget. They are selling cigarettes at a higher price without raising the incidence of taxes. Prices were increased but component of tax was not incorporated in the price of cigarettes. We don't want people to make windfall profits without paying the due amount of excise duty on this item. Therefore, the FED has been raised on the cigarettes from June 6 2015 to ensure that the manufacturers are paying the due excise duty on the enhanced price of cigarettes. Through this SRO, a revenue measure has been taken and no incentive has been given to the cigarette industry. He further stated that Parliament has empowered the FBR to raise the tax rates as per law but now we cannot reduce rate or grant exemption without approval of the Economic Coordination Committee (ECC) of the Cabinet. The FBR has exercised the powers under the law to issue SRO for raising the FED on cigarettes. After approval of the federal budget from Parliament, the FBR will rescind the SRO in question, he added.
According to the SRO.481(I)/2015, rate of duty would be Rs 3030 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price exceeds Rs 3350 per thousand cigarettes (PCT heading, 24.02). The rate of duty would be Rs 1320 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price does not exceed Rs 3350 per thousand cigarettes (PCT heading, 24.02). Senate Committee recommended the National Assembly that the FED on cigarettes may be increased from 58 to 75 percent in budget (2015-16) as cigarettes are extremely harmful to the health of citizens.