Unregistered cigarette makers: supply of filter rods banned

The Federal Board of Revenue (FBR) has imposed a ban on the supply of filter rods for cigarettes to the unregistered persons for controlling its manufacture within the unorganised sector. The decision is part of overall enforcement plan of the FBR to check evasion of sales tax/federal excise duty by the unregistered manufacturers of cigarettes, particularly in NWFP.
Ministry of Finance, Revenue Advisory Council and FBR Anti-Evasion Cell are working on different measures to check evasion in the cigarette industry for improving tax collection in the second half of 2009-10. In this connection, the FBR issued two notifications on Tuesday.
According to SRO.61(I)/2010, the filter rods for cigarettes (Pakistan Customs Tariff heading 5502.0090) shall not be supplied or sold to any person who is not registered under the Sales Tax Act, 1990. Through another notification, the board has excluded filter rods for cigarettes from SRO.488(I)/2004 so that registered person shall not be entitled to reclaim or deduct input tax on supply of filter rods used in cigarettes to the unregistered manufacturers.
Sources told Business Recorder on Tuesday that the filter rods of cigarettes are mostly supplied by the organised sector. If the FBR is able to successfully check supply of filter rods to the unorganised sector, it would help in checking evasion of sales tax/federal excise in the undocumented sector. Without the filter rods, unregistered persons cannot manufacture cigarettes. In this way, the FBR would be able to control evasion of taxes through enforcement measures.