ISLAMABAD: Federal Board of Revenue (FBR) Member Inland Revenue (Operations) Dr Hamid Ateeq Sarwar has said that around 144 personnel of Frontier Constabulary force have been deployed in Khyber Pakhtunkhwa to regulate/ monitor Green Leaf Threshing units, to strengthen enforcement for checking massive evasion in tobacco sector.
During the last meeting of the Public Accounts Committee, Dr Sarwar stated that two platoons of FC have been deployed at 13 GLT units for the purpose of enforcement.
There are only around 13 GLTs in Pakistan, all fully traceable, making them the most logical taxation choke point. In contrast, there are over 450,000 retail outlets, selling cigarettes and more than 50 cigarette factories – primarily in Khyber Pakhtunkhwa (KPK) and Azad Jammu & Kashmir (AJK) – where enforcement at post-processing levels is far more challenging.
FBR to strictly monitor tobacco movement
The FED at GLTs, fully traceable processing units—is a key tax enforcement mechanism designed to curb revenue leakage and illicit cigarette manufacturing. By documenting actual volumes processed by manufacturers, the system ensures declared production aligns with tax liabilities, strengthening the national economy.
Unprecedented excise increase in recent years on the legitimate cigarette manufacturing companies and too low advance FED in previous years has led to the illicit sector to grow to more than 56% of the market. This increase has been fuelled by smuggled cigarette brands.
FBR needs to analyse how much tobacco was processed at GLTs and how much adjustable FED was collected from cigarette manufacturers and how much of this adjustable FED was actually adjusted against the final liability. FBR also needs to check how the GLT processing corresponds with the leaf buying of these manufacturers.
Sources told Business Recorder that the country’s tax potential from the cigarette sector exceeds Rs 600 billion annually.
The two multinational companies that hold 44% of the market paid Rs 292 billion in taxes. Contrary to this, more than 40 local manufacturers controlling the remaining 56% of the market paid a meagre Rs 5 billion. Over Rs 300 billion in tax revenue, more than the federal allocations for education and health combined, has disappeared into the black market.
FBR Chairman Rashid Mahmood Langrial recently admitted that over 90% of the cigarette sector operates outside the formal tax system. The Track and Trace System, introduced to enforce compliance, is failing. Only 19 of 413 registered brands are compliant. The government has proposed deploying Frontier Constabulary units in Khyber Pakhtunkhwa to regulate Green Leaf Threshing, signalling the extraordinary scale of the breakdown in civilian enforcement mechanisms.
Copyright Business Recorder, 2025
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