In a bid to enhance revenue from tobacco sector, government has increased the adjustable FED on unmanufactured tobacco from PKR 10 per Kg to PKR 390 per Kg, applicable at the Green Leaf Threshing (GLT) stage.
The adjustable excise is applicable to and payable by the cigarette manufacturers, The objective of this move is to increase documentation of the tobacco industry and curtail illicit trade. The recent increase in adjustable excise is aimed at increasing the cost of evasion being done by illicit cigarette manufacturers.
This excise is adjustable at the time of filing of returns by the manufacturer. As for export, rebate may be claimed at the export stage and for manufacturers, it may be adjusted at the time of filing of the manufacturer’s tax returns.
While briefing journalists, Pakistan Tobacco Company, reiterated that the adjustable excise duty of Rs. 390 per KG is not applicable to farmers at all but is a liability on the cigarette manufacturers at the GLT stage, however, the manufacturers can adjust this in their monthly tax returns. The false narrative being created regarding this adjustable excise having any impact on farmers is completely baseless and false. Illicit manufacturers are trying to influence policies in their favor by promoting this false narrative. Officials further explained that the tobacco farmers have nothing to do with GLT stage as threshing is part of cigarettes manufacturing process.
Historically, this adjustable excise duty was increased from PKR 10 per Kg to PKR 300 per Kg in the mini-budget issued by the PTI government in October, 2018, however, due to pressure from certain quarters it was reversed before the GLTs became operational.
Experts believe that adjustable advance duty at GLT stage is a perfect way to control tax evasion as it is the choking point in the process of manufacturing cigarettes.
