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ISLAMABAD: The Federal Board of Revenue (FBR) Member Inland Revenue (Operations), Malik Amajd Zubair Tiwana, said Friday that the adjustable Federal Excise Duty (FED) of Rs390 per kg on unmanufactured tobacco is not applicable on farmers.

This has been stated by the FBR Member during the first meeting of the Special Committee on Grievances of Local Tobacco Growers and Manufactures.

Senator Molana Abdul Ghafoor Haideri, Convener Senate Special Committee on Grievances of Local Tobacco Growers and Manufacturers presiding over a meeting of the committee at the Parliament House, here on Friday.

The tax authorities informed the committee that the government has increased the adjustable FED on unmanufactured tobacco from Rs10 per kg to Rs390 per kg, applicable at the Green Leaf Threshing (GLT) stage to control tax evasion in tobacco sector.

The adjustable FED on unmanufactured tobacco has nothing to do with the farmers. This excise is not payable at the stage of farmers.

Tobacco: new excise regime unveiled

The adjustable excise is applicable to and payable by the cigarette manufacturers, they said.

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. In case of exports, 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.

The adjustable excise duty of Rs390 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 committee finalised the terms of reference of the Senate Special Committee on Grievances of Local Tobacco Growers and Manufacturers. The TOR included an investigation of disparity in tax imposition by the FBR on growers as well as local manufacturers of tobacco products, which is leading to the shutdown of the local tobacco industry, causing great harm to employment and business, particularly in the Khyber-Pakhtunkhwa.

Senator Haideri stated that many small cigarette manufacturing companies are operating in the KP province. These units are overburdened with the current taxation on the tobacco sector. The additional taxation measures taken in last budget (2022-23) has also created serious problems for the local manufacturers. The FBR has given notices to these small factories to close their businesses but the matter is in litigation.

The Chairman Senate has constituted this special committee to resolve the problems of the growers and farmers of the tobbaco.

Some committee members were of the view that the same kind of taxation on multi-national companies and small local units is unjustified. This has created an uneven situation for the local manufacturers or small units.

The tax would end the competition between the local companies and big entities companies and small companies would be out of business. There would be a monopoly of only big companies after the implementation of this tax, the committee members added.

Copyright Business Recorder, 2022

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