Tobacco dealers: PTB told not to recover taxes at domestic stage

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue has conveyed to the Pakistan Tobacco Board (PTB) that the local supply of raw tobacco is exempted from sales tax and federal excise duty (FED) and recovery of taxes cannot be made from tobacco dealers at domestic stage.

Sources told Business Recorder here on Monday that the PTB had earlier requested the FBR to take action against unauthorized tobacco dealers for recovery of the FED and sales tax applicable on the commodity sold to cigarette manufacturing companies without payment of duties and taxes. The FBR had referred the matter to the Regional Tax Office (RTO) Peshawar to check admissibility of the FED/sales tax on local supply of raw tobacco.

It has been brought to the notice of the FBR that the FED/sales tax is not applicable on the local supply of raw tobacco. The tax department has not agreed to the interpretation of the PTB on the issue, sources said.

According to the communication of the RTO Peshawar to FBR, the contents of the PTB’s letters have been examined in light of provisions of Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Federal Excise Act, 2005. It may be noted that supply of raw tobacco is neither chargeable to sales tax nor chargeable to federal excise duty.

The serial No.10 of the Table-2 of the 6th Schedule to the Sales Tax Act, 1990 provides exemption from sales tax to this commodity and since raw tobacco is not mentioned in any of the Schedules attached to the Federal Excise Act, 2005, the same is also exempt from payment of federal excise duty.

However, the business mentioned by the PTB could be booked for the income tax purposes provided that complete mailing addresses are shared with the RTO. It is, therefore, requested that details about the premises and owner of the businesses may be provided for the purpose, RTO Peshawar added.