CNIC condition: Decline in cigarette sale costs kitty Rs1.04 bn monthly

ISLAMABAD: Pakistan’s formal sector of cigarettes industry have estimated a significant decline in their sale to the tune of 470 million sticks alone in September 2019 because of CNIC condition of the FBR.

This decline in sale has caused losses to the national exchequer to the tune of Rs1.040 billion on monthly basis, the latest estimates calculated by the industry and shared with The News disclosed.

The formal sector has been facing two edged sword as on one side their sale is on decline while on other hand, the share of non-duty paid and smuggled cigarettes is on the rise in the domestic market.

The sale of formal sector has declined exactly at a time when the share of duty non-paid (DNP) and smuggled cigarettes increased in recent months, resulting in loss to the tune of Rs300 million to national exchequer alone on this head.

“Overall the government has been facing an estimated loss of over Rs1.5 billion a month on both these two accounts,” said the industry sources.

All this has been happening when the FBR is eyeing to collect Rs140 billion from tobacco sector during the current fiscal year 2019-20 against the collection of Rs113 billion in last fiscal year. The FBR had abolished three tier taxation system and came up with two tier taxation by jacking up tax rates to go close to align it with the recommendation of WHO for the purpose of discouraging consumption of tobacco.

However, the data of formal sector available with The News states that there were total 250,737 active outlets of Pakistan Tobacco Company (PTC) for selling cigarettes all over the country out of which 33,385 outlets reported zero sale in September 2019. It resulted in significant decline in sale out of 470 million cigarette sticks just in one month.

The break-up of total outlets further showed that there are 60,044 outlets located in Northern part of the country including federal capital and KP out of which 9,401 outlets reported zero sale that resulted in decline of 145 million cigarette sticks in September 2019.

There are 68,744 outlets located in central part of Punjab out of which 9,065 outlets reported zero sale, which resulted in decline in sale of 138 million cigarette sticks. There are 64,273 outlets in Southern Punjab out of which 2,899 outlets made zero sale due to which sale out of 54 million cigarette stick declined in September 2019. There are total 57,676 outlets in Sindh and Balochistan out of which 12,021 reported zero sale that resulted in decline of 133 million cigarette sticks just in one month of September 2019. Owing to CNIC condition, total 33,385 outlets across the country had stopped selling of cigarettes. “It has caused a loss of Rs1.040 billion to the national exchequer as our sale has declined substantially,” the industry sources said while quoting their figures.

Now the market survey done by the formal sector showed that the share of Pakistan Tobacco Company declined from 51.1 to 50.5 percent from June 2019 to September 2019. The share of non-duty paid cigarettes increased from 27.2 to 27.7 percent from June to September 2019.

The share of Philip Moris stood at 17 percent in June 2019, which now reached 16.8 percent. The share of smuggled cigarettes increased from 4.8 percent to 5 percent from June to September 2019.

The counterfeit of certain brands of formal sector has been on the rife as the fake cigarettes are selling even in the federal capital much below the price fixed after increased taxation. On monthly basis, the share of formal sector for selling cigarettes has been on decline consistently.

When contacted to FBR’s Member Inland Revenue Policy and official spokesman Dr Hamid Ateeq Sarwar for seeking official version, he replied that the tobacco industry did not share their complain about any decline in their sale with the FBR. The tax authorities, he said, held meeting with AJK government on last Monday and asked them to place track and trace system and also share data of production being produced by units located in AJK areas. He said that the FBR was asking AJK government to sign MoU for effective enforcement. He said that the FBR was monitoring Green Leaf Threshing Plants (GLTP).

To another query about actions against counterfeit cigarettes, he said that it was responsibility of district administration. The track and trace system, the FBR official said, would be awarded within this ongoing month, which would help track down real production and seizing illicit cigarettes in effective manner.