Punjab likely to impose Rs5/litre excise duty on ethanol

LAHORE:The Punjab government is considering to impose Rs5 per litre excise duty of ethanol in the province which will generate over Rs20 billion to the provincial exchequer.

The sources in the Punjab government disclosed that the idea was under consideration for exploring the new avenues for tax generation with objectives that it would not affect the masses at large. The ethanol is a by-product of sugar production process and a raw material for the liquor production. So it is mainly used in liquor production in the country followed by a smaller component for medicines production. A major chunk of the ethanol is exported from Pakistan.

The official in Punjab government disclosed that in the past Rs2 per litre excise duty was imposed on the ethanol pretext of its use in liquor production. The consumption of liquor is prohibited in Islam while according the Constitution of Pakistan only non-Muslims are allowed to consume it in Pakistan. Further, being an Islamic state, export of liquor is not allowed from Pakistan as well. Thus, the excise duty was imposed on the ethanol, a basic raw material and component of liquor manufacturing. The government collected Rs10 billion amount in just six months from this excise duty. However, the ethanol producers, which are mainly, sugar millers as it is by-product challenged it in the court. But before any court decision, the previous Punjab government withdrawn the imposition of the excise duty from ethanol.

Pakistan Ethanol Manufacturers Association (PEMA) Chairman Muhammad Waheed Ch talking to The News said that in the past excise duty was imposed but then withdrawn by the new government. However, he has firm belief that the government would not impose excise duty on ethanol this time. On question if the government imposed the excise duty, he said a substantial quantity of ethanol was exported from country so the exports could not be taxed. But the government can tax the domestic consumption which he claimed is negligible.

The available data on the PEMA website shows that Pakistan exported 353,936 metric ton ethanol in 2021, 229,639 tons in 2020, 349,491 tons in 2019 and 536,176 tons in 2018. The ethanol production is directly related with the sugarcane crushed and sugar produced in the country.