ISLAMABAD: The government is considering a budget proposal of the documented tobacco industry to impose Rs300 advance adjustable FED on tobacco, at the green leaf threshing stage, in the coming budget (2022-23).

Sources told Business Recorder on Friday that regularising Green Leaf Threshing Units (GLT) is necessary to check the illicit trade of cigarettes. The GLT’s across Pakistan are a source of basic raw material for cigarette manufacturers. The collection of tax at the GLT stage is under consideration by the FBR.

As per Finance Act 2019, a Rs10 per kg advance tax was implemented on tobacco purchases which has no impact on the farmers as only the cigarette manufacturers bring tobacco for GLT processing and are liable to pay this adjustable FED. In 2018, the said advance tax was increased to Rs300 per kg by the government, however, successful lobbying by the illicit cigarette manufacturers led to a reversal to Rs10 per kg from Rs300 per kg. Another proposal is that this adjustable FED on tobacco needs to be increased to at least Rs500 per kg which will further increase the cost of tax evasion.

Sources said that this advance adjustable tax is applicable only on the tobacco that enters the Green Leaf Threshing (GLT) plant. All manufacturers who purchase tobacco from farmers must process tobacco through GLT before it can be used for manufacturing of cigarettes. The measure has been instrumental in documentation of the purchase of tobacco by manufacturers of cigarettes and other tobacco products. It is an adjustable tax having no additional burden on the manufacturers and has no linkage to the farmers.

As soon as the manufacturer’s tobacco enters the GLT for processing into usable tobacco, the manufacturer is bound to pay this FED to the FBR. This tax is refundable/ adjustable and does not add any additional burden on the manufacturer. However, it notifies the FBR of the quantities that have been purchased and being processed by all manufacturers.