ISLAMABAD: In an unexpected move, the amended Finance Bill 2023 to be announced on June 23 is expected to decrease Federal Excise Duty (FED) on cigarettes and juices from July 1, 2023.
It has been reliably learnt that the decision has been taken at the highest political level to bring down the rates of the FED on juices and cigarettes through amendments in the Finance Bill 2023.
However, the Ministry of Finance and the Federal Board of Revenue (FBR) have opposed any move to decrease the FED on juices as well as cigarettes. The possible reversal of two big measures taken in the mini-budget in February 2023 reflects the extraordinary pressure of formal sectors on the current political regime.
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In the budget (2023-24), the government has not touched the FED rates on these two items. The FED rates were enhanced in the mini-budget in February 2023, but the Finance Bill 2023 has not made any changes in these rates in the budget (2023-24). There is a strong possibility to decrease the FED rates on both items through amendments in the Finance Bill 2023.
Sources raised the question that whether the formal sectors are politically so well-connected that they are able to influence the government to amend the Finance Bill 2023 despite, the resistance of the Finance Ministry as well as the FBR.
In February 2023, the FED at the rate of 10 percent was imposed on juices. Under the first slab of cigarettes, locally-produced cigarettes if their on-pack printed retail price exceeds Rs9,000 per 1,000 cigarettes, the rate of the FED would be Rs16,500 per thousand cigarettes.
Under the second slab, the locally-produced cigarettes if their on-pack printed retail price does not exceed Rs9,000 per thousand cigarettes, the rate of the FED would be Rs5,050 per thousand cigarettes.
Sources stated the FED is likely to be decreased on both the slabs of the cigarettes in the final winding-up speech on the amended bill 2023. The government may give the excuse of smuggling and an increase in the illicit trade of cigarettes behind the possible decrease in the FED on cigarettes.
The government under the contingency revenue measures agreed with the International Monetary Fund (IMF) had increased the FED on cigarettes and beverages in the mini-budget during February 2023.
In view of these risks, the government has committed to triggering contingency measures at the earliest signs of fiscal programme underperformance. If monthly revenue data showed signs of underperforming against targets, the government had agreed to take immediate action to raise additional revenue, as necessary, through increasing FED on Tier-I and Tier-II cigarettes by at least, two rupees per stick and the raise in taxes on sugary drinks.
Copyright Business Recorder, 2023
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