The Federal Board of Revenue (FBR) has directed a leading cigarette manufacturing giant to meet the tax authorities on Wednesday (January 22) to discuss ways and means to generate additional Rs 12 billion Federal Excise Duty (FED) in 2013-14 as committed by cigarette manufacturers in last budget. Sources told Business Reorder here on Tuesday that the officials of the multinational cigarette manufacturing company would meet FBR Chairman Tariq Bajwa at the FBR House on Wednesday.
The FBR will raise question that why documented cigarette industry has failed to achieve the required growth in revenue collection as committed by the cigarette manufactures in budget (2013-14). Secondly, the FED slabs were revised in last budget on the suggestions of the said cigarette company, but additional revenue to the tune of Rs 12 billion has not been collected. The revenue position in first half of 2013-14 reflected that one cigarette manufacturer only achieved below 10 percent growth in revenue whereas the second company has shown better performance during this period. However, the current FED trends shows that the additional measures are required to collect additional Rs 12 billion FED in the remaining period of 2013-14.
According to sources, the number of smokers in Pakistan has not decreased in 2013-14. The question arises whether the market share of cigarettes has been captured by the second cigarette manufacturing company or small manufacturers or smuggled cigarettes.
The FBR will also direct the cigarette manufacturing company to share future strategy with the tax authorities for improving FED collection during 2013-14. In this regard, the FBR is minutely probing tax record of two multinational cigarette companies for not fulfilling the commitment made in budget (2013-14) for achieving 20 percent growth in FED collection during the current fiscal year.
The two cigarettes giants have committed with the FBR to show at least 20 percent increase in FED collection following introduction of new FED slabs for different brands of cigarettes. Through Finance Act 2013, the government had revised the FED structure on cigarettes on the basis of FED slabs proposed by the multinational cigarette manufacturing companies. The companies have also committed to make the said growth in revenue collection after incorporation of new FED structure on cigarettes.
In 2013-14 budget preparation exercise, the FBR had proposed a very simple FED structure for levying duty on cigarettes. At that time, the proposal was duly approved by the Finance Ministry for revision of the FED slabs on cigarettes. However, a new proposal was floated by the cigarette manufactures which was incorporated in the Finance Act, 2013.
Through Finance Act 2013, the First Schedule of the Federal Excise Act 2005 was amended to replace the three tier FED structure with two-tier specific rate structure. The revised FED structure on cigarette was drafted by the multinationals and the same was duly incorporated in the Finance Act. This was for the first time that the Federal Board of Revenue (FBR) has taken major budgetary measure of the FED on the basis of proposal drafted by the cigarette manufacturers.
According to the revised FED structure, the rate of the FED would be Rs 2325 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price exceeds Rs 2286 per thousand cigarettes. The rate of the FED would be Rs 880 per thousand cigarettes where locally produced cigarettes if their on-pack printed retail price does not exceed Rs 2286 per thousand cigarettes. The FBR has estimated to collect Rs 12 billion from the revised FED structure on cigarettes.