FBR Launches Crackdown Against Mispricing of Cigarettes

The Inland Revenue Department of the Federal Board of Revenue (FBR) has launched a crackdown against the mispricing of cigarettes and impounded 650 cartons of cigarettes from a leading multinational cigarette manufacturing company.

The FBR’s Inland Revenue has taken the lead against the cigarette manufacturers involved in less payment of the federal excise duty (FED) through the phenomenon of mispricing of brands.

The case falls under the tax jurisdiction of Karachi and the mispricing of cigarette brands has resulted in less payment of the FED to the national exchequer. The said company has fixed the retail price of one of its brands less than the fixed/applicable rate of Federal Excise Duty (FED).

Sources told ProPakistani that further investigations are underway against the said leading tobacco company. The name cannot be disclosed at this initial stage of investigation involving the reputation of the company, they added.

It is important to mention that a company printed the price list of its cigarette brands on August 9 and advertised its brand’s price including the sales tax. As per the Federal Excise Act, 2005 Schedule 1, item no. 9, the Federal Excise Duty (FED) on cigarette packets in Tier 1 is Rs. 330. However, as evident from the advertisement, the retail price mentioned for this brand is less than the applicable FED.

The printed retail price is not only below the applicable duty, but as per section 12, sub-section 4 of the Federal Excise Act, 2005, the retail price does not include any other charges such as the cost of production and other applicable taxes. In view of the above laws, the advertised retail price is allegedly in violation of the minimum FED as defined under the law, and in addition to that the cost of production is not added to the retail price.

This resultantly leads not only to alleged evasion of FED but also the sales tax — higher retail price attracts higher sales tax at the rate of 18 percent.