LAHORE: The country's tobacco sector is plagued with tax evasion and an estimated Rs 80 billion are evaded annually due to illegal tobacco trade. Tax evasion at Green Leaf Threshing (GLT) stage is evident from the fact that as per estimates, there is an alarming gap between tobacco produced and tobacco used in declared cigarette manufacturing.

The SRO 1149 authorizes the FBR to appoint an Inland Revenue Officer to oversee threshing plants, who will monitor and verify tax receipts, along with tobacco processing, storage and waste. GLT plants are also required to submit details of daily threshing, storage, waste, tobacco supply and applicable levies to the commissioner.

Experts believe that if the government manages to ensure implementation of GLT monitoring in its true spirits, it can deliver results as it is much easier to monitor 10 GLT plants than it is to monitor approximately 2,000,000 retailers nationwide.

An industry expert said that there are only 10 GLT plants in the country. Placing diligent officers at GLT premises and accounting all the processing can uproot the tax evasion in the sector. He added that FTOs findings indicate that there is a clear loophole in the mechanism drawn in SRO 1149 and its implementation.

It may be noted that in 2018, when the government decided to increase GLT tax to Rs300/kg in the mini-budget to further increase the cost of tax evasion for the illicit manufacturers, a committee was formed under Speaker Asad Qaiser, including senators, senior federal and provincial ministers to evaluate the matter.

Copyright Business Recorder, 2021