Despite strong resistance of two cigarette manufacturing giants, the Federal Board of Revenue (FBR) has moved to increase excise duty on cigarettes to generate additional revenue of Rs 10 billion in remaining period of 2012-13. Sources told Business Recorderhere on Friday that multinational companies strongly resisted proposed increase in the Federal excise Duty (FED) on cigarettes.
Interestingly, cigarette manufacturers wanted to continue with the existing complex structure of the FED as per federal Excise Act, 2005. The proposed slab structure on cigarettes would ensure an increased amount of excise duty from all brands available in the market.
While drafting the revised taxation proposal, the FBR has targeted 2-3 major brands which have a major market share. Under the new FED structure, the multinational companies would be bound to charge a higher amount of the FED on cigarettes. Even if they tried to charge less amount of the FED on certain brands of cigarettes, it would not be practically possible because of the introduction of only two slab structure. Either the brand would fall under the first proposed slab or second slab. The first proposed slab said that if retail price exceeds Rs 50 for 20 cigarettes, rate of the FED would be 65 percent of the retail price.
The second proposed slab said that if retail price does not exceed Rs 50 for 20 cigarettes, the rate of the FED would be 25 paisa per stick plus 50 percent of the retail price. Officials admitted that the prices of the cigarettes would increase following the hike in the FED. As cigarettes are not an essential food item or consumer product, the increase in price of this item would not harm general public, officials contended.