The Federal Government has announced an Rs. 36 billion new tax on cigarettes and tobacco, said Minister of Finance and Revenue, Miftah Ismail during a press conference.
According to the Minister, the tax has been imposed to fulfil the gap created from the reduction in retail tax from Rs. 42 billion to Rs. 27 billion. The Ministry of Finance had initially suggested a tax of Rs. 18 billion on tobacco to fulfil the gap, however, the Federal Government decided to double the taxes to Rs. 36 billion.
The total tax imposed on a stack of 50 packs (1000 cigarettes) tier-2 cigarettes (Capstan etc.) has been increased from Rs. 1,850 to Rs. 2,050, whereas for tier-1 cigarettes (GoldLeaf etc.) the tax was raised from Rs. 5,900 to Rs. 6,500 on a stack of 50 packs.
Similarly, the tax on tobacco has been increased from Rs. 10 per kg to Rs. 380 per kg, an increase of 3,800 percent. The tax on tobacco is a cess (tax) whereas the tax imposed on cigarettes comes under excise tax, said Miftah.
It is pertinent to mention that the PTI government had increased the tax on tobacco from Rs. 10 per kg to Rs. 300 per kg, however, it had to retract the decision due to pressure from the tobacco industry.
Miftah revealed that the tax on tobacco will help in regularizing the tobacco industry putting an end to the illicit production of cigarettes. It will also derive tobacco companies to pay sales tax which they had been evading previously and be a part of the track and trace system of the government. Till now four new companies have been registered in the system, he added.