Cut in FED causes illegitimate cigarette production

ISLAMABAD: Illegitimate cigarette are seen in the market in abundance after the reduction of Federal Excise Duty (FED) on filter rods from Rs1 to 20 percent of the value goods.

Sources in the cigarette industry revealed that the reduction of FED has facilitated the business of illegitimate cigarette producers as the surveillance and monitoring by the concerned authorities is already weak.

It is worth mentioning that the FED on filter rods was placed during the last year budget. At the rate of Re 1 per filter rod on cigarettes, the duty was allowed to be adjusted and the measure was largely aimed at realizing revenue on sale of filter rods from unregistered and illicit manufacturers of cigarettes and to document the economy.

Not only this, the board had also made it binding on the cigarette manufacturers to compile comprehensive production and sales data of filter rods to eliminate federal excise duty evasion.

Custom Intelligence documents reveal that a sizeable Rs80 million duty was imposed on M/s Filters Pakistan (Pvt) Limited for the tax evasion while a duty of Rs40 million was imposed on Paramount International (Pvt) Limited for the same offence.

These incidents have thrown the illegitimate cigarette industry in a state of disarray with several companies pushed FBR to reduce the duty on each cigarette filter rod to 0.20 per cigarette filter rod.

Sources in the legitimate cigarette industry feel that the informal cigarette industry is given this needless cushion leverage, it could lead to major revenue losses to the FBR.

Copyright PPI (Pakistan Press International), 2011