2019-20: FBR plans to collect Rs150 bn from cigarettes industry

ISLAMABAD: The Federal Board of Revenue (FBR) has estimated collection of Rs150 billion from cigarettes industry during the current fiscal year 2019-20 against collection of Rs110 billion in the last fiscal year 2018-19.

“We will collect more taxes to the tune of Rs150 billion including Rs140 billion from two major tobacco companies and Rs10 billion from illicit tobacco as we have decided to install track and trace system to jack up our revenue collection,” FBR’s Member Inland Revenue (IR) Policy Dr Hamid Ateeq Sarwar said in a policy dialogue organised by Social Policy and Development Center (SPDC) here on today.

He said the FBR abolished three tier system and came up with two tier system and jacked up taxation rates in line with WHO requirements. This policy, he said, was aimed at achieving two objectives including reducing consumption of tobacco and increasing revenues. He said the FBR collected Rs110 billion in shape of Federal Excise Duty (FED) and GST in the last financial year 2018-19 that had ended on June 30, 2019. The FBR had collected Rs90 billion as FED and Rs20 billion in shape of GST in 2018-19.

On the other hand, the industry is expressing its fears that the abolishing of three tier system and increase in share of illicit will make it difficult for the FBR to collect the desired revenues of Rs150 billion in the current fiscal year.

Now for the current fiscal year, he said the FBR estimated to collect Rs115 billion in shape of FED and Rs25 billion as GST while the FBR would collect Rs10 billion from illicit cigarettes. He said the IMF put condition to finalise track and trace system till September and it would become operational by March 2020. He said the formal industry increased its price so the desired tax collection would be materialized.

He said the share of illicit cigarettes stood in the range of 15 to 17 percent but the formal industry took stance that it was hovering around in the range of 35 percent. He said the FBR devised its plan for six years as in first three years the revenues would be maximize and then

efforts would be made to curtail consumption in last three years. He deplored that tobacco exports were fetching peanuts so there was need to ensure value addition and earn share in exports.

He said the tax rate was brought down on GLTP (Green Leaf Threshing Plants) from Rs300 to Rs10 per kg in the last budget but the monitoring would continue to achieve the desired results. He said the GLTP would be placed in AJK. He said the FBR decided to ensure strict monitoring at Mangla for controlling smuggling of cigarettes from AJK and Army also agreed to assist us for curtailing smuggling from Sindh to Punjab.

Earlier, the SPDC also presented their findings before the participants and stated that the consumption reduced from 9 to 18 percent in recent years while revenues increased with the FBR policy so the direction of taxation policy was moving in the right direction.