Excise duty hike: Cigarette industry witnessing big surge in illegal trade

ISLAMABAD: The cigarette industry is experiencing a surge in illegal trade in recent months, particularly following a significant excise increase in February 2023.

Fueled by this excise duty hike, the industry sources have revealed a concerning trend of widespread availability of counterfeit cigarettes in the market, affixed with fake stamps. This raises serious doubts about the efficacy of the Track & Trace System, both in terms of implementation and enforcement.

According to industry sources, around 850 million counterfeit cigarette sticks are currently being sold, equivalent to 42.5 million packs featuring fake stamps, resulting in substantial loss of approximately PKR 5.7 billion in duties and taxes to the national exchequer.

The issue is more prevalent in big metro cities such as Islamabad and Rawalpindi as well as other regions. It is surprising to note such blatant violation in cities where enforcement is considered easier to conduct by the relevant authorities in contrast to far flung areas.

The implementation of a Track and Trace System can only be successful through extensive & sustained enforcement at retail level.

Only two cigarette manufacturers have diligently implemented the Track & Trace System, in letter and spirit, yet the prevalence of illicit trade persists and continues to grow. All cigarette manufacturers must be brought into the tax net to ensure success of this system.

Copyright Business Recorder, 2024