Electronic cigarettes: FED on e-liquid raised to Rs16,500

ISLAMABAD: Under the Finance Bill 2026-27, the federal government has increased Federal Excise Duty on e-liquid for electronic cigarettes to Rs16,500 from Rs10,000 per kilogram, while removing the highest possible tariff of 65 percent of the retail price imposed under the previous regime.

The bill proposes a series of revenue measures under the Federal Excise Act, 2005. These include imposition of FED on naphtha, solvent oil, turpentine and other similar products. The government has also proposed imposition of FED on luxury electric vehicles and other luxury vehicles.

In addition, the bill proposes FED on base oil and base lubricating oil, in addition to lubricating oil. A new Table 1A is being inserted in the First Schedule to the Federal Excise Act, 2005, for imposition of FED on luxury imported vehicles.

The government has also proposed addition of a new entry in the Second Schedule to make FED levied on the above-mentioned petroleum products applicable in VAT mode.

On the relief side, the government has proposed reduction in FED on foreign travel. It has also proposed reduction in FED on import of acetate tow from Rs44,000 to Rs10,000.

The bill further proposes removal of FED on WHO-standard compliant sports and electrolyte-replenishing beverages. It also provides exemption to strategic imports of vehicles for the SCO summit and counter-terrorism purposes. The government has also extended exemption on import of CKD kits for electric vehicles for one year, up to June 30, 2027.

The Finance Bill also contains streamlining measures under the Federal Excise Act, 2005. These include insertion of definitions of advance receipt invoice, algorithmic settlement mechanism, electronic invoicing system, national faceless centre and production monitoring system. A new Section 7A is being added for adoption of faceless audit and assessment.

The bill proposes substitution of sub-section (1) of Section 18 for issuance of invoice for dutiable and zero-rated supply of goods.

It also proposes substitution of sub-section (4) of Section 19 regarding penalty for destruction of goods without approval of the Commissioner.

Sub-section (1) of Section 26 is being substituted for seizure of counterfeited cigarettes, beverages and other goods without tax stamps, barcodes and other required markings.

Copyright Business Recorder, 2026