FED on cigarettes linked to health levy withdrawal

ISLAMABAD: The Senate Standing Committee on Finance and Revenue on Friday agreed in principle to increase federal excise duty (FED) on cigarettes if ministry of finance withdraws health levy of Rs10/kg on tobacco.

The committee said it would recommend the government to withdraw health levy and tasked the Federal Board of Revenue (FBR) to come up with working about increased taxation on cigarettes. The board was asked to calculate the exact impact of health levy and come up with proposed increase in FED on cigarettes through Finance Bill 2018.

Ministry of Finance told the senate standing committee that the health levy

was imposed on the proposal forwarded by ministry of health.

The Law Division said the health is a provincial subject, but imposing levy is prerogative of the federal government and is not against the 18th amendment into the constitution.

Senators belonging to Khyber Pakhtunkhwa said FBR should not impose taxes on growers. They said they don’t have objections if the government increases taxes on cigarettes.

Senators Musadik Malik and Ayesha Raza belonging to treasury benches argued that the smoking should be discouraged through taxes. The FBR’s Member Tax Policy Mohammad Iqbal said they don’t have any objections if the health levy is withdrawn and FED on cigarettes should be increased in the same proportion. The committee also approved the inclusion of exemptions allowed to China-Pakistan Economic Corridor-related projects in the Finance Bill 2018 if the copy of PC-1 of the project in which exemption was granted

and final audit report on completion of the project is provided.

The committee also approved exemption from FED on commission paid by the State Bank of Pakistan and its subsidiaries to the National Bank of Pakistan or any other banking company for handling banking services of federal or provincial governments.