The Federal Board of Revenue (FBR) has proposed substantial enhancement in incidence of federal excise duty (FED) on different brands of cigarettes to generate additional revenue from luxury items from 2011-12 budget. Sources told Business Recorder here on Tuesday that the FBR has proposed tax rationalisation on various brands of cigarettes, taking into account collection from the cigarettes industry during 2010-11.
According to the proposal, the rate of the FED is 65 percent of the retail price in case the retail price of cigarettes exceeds Rs 19.5 per 10 cigarettes. Under the proposal, the rate of the FED would be 65 percent of the retail price in case the retail price exceeds Rs 21 per 10 cigarettes.
At present, the rate of the FED is Rs 5.25 per 10 cigarettes plus 70 percent of the incremental rupee or part thereof where retail price exceeds Rs 10 per 10 cigarettes, but does not exceed Rs 19.5 per 10 cigarettes. The FBR has proposed that the rate of the FED would be Rs 6.04 per 10 cigarettes plus 70 percent incremental rupee part thereof where retail price exceeds Rs 11.5 per 10 cigarettes, but does not exceed Rs 21 per 10 cigarettes.
At present, the rate of the FED is Rs 5.25 per 10 cigarettes where the retail price does not exceed Rs 10 per 10 cigarettes. The FBR has proposed that the rate of the FED would be Rs 6.04 per 10 cigarettes where the retail price does not exceed Rs 11.5 per 10 cigarettes. Under the said proposed slab, the FBR has proposed to enhance the FED from Rs 5.25 per 10 cigarettes to Rs 6.04 per 10 cigarettes.
In last budget, the FBR had restricted the cigarette manufacturers from revising the prices of cigarettes downwards after the announcement of 2010-11 Budget. During current fiscal year, the FBR had estimated to collect around Rs 13 billion from cigarette industry following upward revision of excise duty structure on cigarettes in 2010-11. Prior to 2011-12 budget, the tax incidence on most popular brands in Pakistan is around 56 percent, which is well below the regional and international standards. To rationalise the tax incidence on various brands and to make the tax incidence on cigarette industry in Pakistan compatible with world standards, the FBR had upward revised excise duty structure on cigarettes in last budget.