The manufactures of non-duty paid and counterfeit cigarettes are constantly avoiding documentation measures of the Federal Board of Revenue (FBR) within the supply chain to avoid duties and taxes at each and every stage of cigarette manufacturing. Sources told Business Recorder here on Thursday that the recent move of the local tax evading cigarette industry is evident from the fact that an impression was created that 5 percent adjustable advance tax has been imposed on farmers through Finance Act 2017.
For example, Pakistan Tobacco Board (PTB) is required to collect advance tax at the rate of 5% of the purchase value of tobacco from persons purchasing tobacco including manufacturers of cigarettes. The tax so collected shall be adjustable against the income of the purchasers. This measure has been introduced to curtail the manufacture of illicit and non-duty paid cigarettes because such manufactures would have to maintain documentation on legal purchase of tobacco.
Moreover, documentation of the purchase and supply of tobacco would also expose the exact number of cigarettes being manufactured by the tax evading industry. Sources clarified that an adjustable advance tax collection responsibility has been placed on Pakistan Tobacco Board or its contractors, at the time of collecting cess on tobacco, directly or indirectly, at the rate of five percent (5%) of the purchase value of tobacco from every person purchasing tobacco including manufacturers of cigarettes. However, it levy has not been imposed on farmers of tobacco.
The fact is that the farmers are protected already through MLO 487 whereby the prices automatically increase every year. However, Finance Act 2017 has not imposed any kind of 5 percent adjustable advance tax on farmers. Some quarters have tried to create a wrong impression that 5 percent advance tax has been imposed on farmers, which is legally totally incorrect. This tax has been levied by FBR for check and balance purposes on those manufacturers who evade taxes. 5. Therefore, none of these measures effect the farmers and their yield.
In order to document purchase of tobacco, Pakistan Tobacco Board is being entrusted with collection of withholding tax on purchase of tobacco by manufacturers of cigarettes at the rate of 5% of the purchase value of tobacco, at the time of collecting cess. It is not clear that how the farmers of tobacco can give call for agitation when such tax has not been imposed on them or they are not legally required to deposit the levy under the provisions of the Income Tax Ordinance 2001.
Thus, it is a documentation measure to check tobacco purchase/sale and it has nothing to do with the farmers, sources added.