Directorate General of Intelligence and Investigation Inland Revenue (IR) has proposed that the Green Leaf Threshing (GLT) units engaged in processing/redrying of un-manufactured tobacco may be bound to make supply of processed tobacco only to registered cigarette manufacturers in budget (2016-17). According to the budget proposals of the directorate submitted to the FBR for consideration in coming budget (2016-17), Federal Excise Duty which is chargeable on processed/un-manufactured tobacco @ Rs 10 per Kg may be enhanced to the same amount of duty involved in 1000 cigarette sticks that could be manufactured from one kilogram of tobacco.
Based on the proposal of Directorate of I&I IR Peshawar, the agency has proposed that the un-manufactured tobacco is the basic constituent/raw material for manufacture of cigarettes and is chargeable to Federal Excise Duty @ Rs 10 per Kg. Since there is no such provision with regards to supplies of un-manufactured/processed tobacco to registered manufacturers, therefore, supplies of such tobacco made to unregistered persons are never accounted for in manufacturing of cigarette resulting in loss of major revenues which could have been realised had this tobacco was consumed in declared manufacturing of cigarettes.
It is, therefore, suggested that the following further amendments may be made to the Federal Excise Act, 2005 for redressal of the above: Firstly, Green Leaf Threshing (GLT) units engaged in processing/redrying of un-manufactured tobacco may be bound to make supply of such processed tobacco only to registered cigarette manufacturers as the same are industrial input good which can only be used in manufacturing of cigarettes.
Secondly, Federal Excise Duty which is chargeable on processed/un-manufactured tobacco @ Rs 10 per Kg may be enhanced to the same amount of duty involved in 1000 cigarette sticks that could be manufactured from one kilogram of tobacco, However, the registered manufacturers may be allowed to adjust the same amount of duty from the payable on manufacturing/supply of cigarettes, so that the leviable duty may be recovered from GLT manufacturers on any quantity of processed/un-manufactured tobacco supplied to unregistered persons.
Thirdly, identical provisions may also be framed in cases of other major input goods/ raw materials whether imported or locally procured including Filter Rods, Cigarette Paper, Tipping Paper, Acetate Tow, Plug Wrap, Foil and Tear Tape where the same are supplied to unregistered persons other than registered cigarette manufacturers. For the purpose of effective monitoring of processed/un-manufactured tobacco and other major input goods of cigarettes, it is suggested that these raw materials as well as input goods may be included in the list of excisable goods which could be seized and confiscated by making appropriate amendments in section 26 and section 27 of the Federal Excise Act, 2005 along with proviso to Rule 63 of the Federal Excise Rules, 2005.
The vehicles of cigarette manufacturers or dealers/distributors carry invoices and the bilty. There is no such mechanism available with the surveillance staff to ascertain the validity of such invoices produced by drivers of the vehicle. It has been observed by that the record of manufacturers is also altered when any of such vehicles is intercepted by surveillance staff. It is, therefore, suggested that the federal excises invoices may be required to be issued with a universal online serial number along with bar code imprinted on such invoices by the system. Under the proposed system the taxpayers may be required to download invoice from the FBR web portal where automated record of transactions of each taxpayer is being maintained. This could help in reducing the practice of movement of non-duty paid cigarettes and effective monitoring/surveillance duty, directorate proposed. The carrier of goods, ie, cigarette may also be made liable to carry copy of sales tax/federal excise, invoice at all times till the goods are delivered to the buyer/retailer, sources added.