Revoking duty to dent revenue

Illegal cigarette manufacturers and traders have mobilised tobacco farmers against the newly imposed advance excise duty on purchase of unmanufactured tobacco, said tobacco industry stakeholders.

These elements were misleading tobacco farmers by inciting them against the levies collected on tobacco through the Green Leaf Threshing (GLT) units and were campaigning against the advance excise duty, they said.

According to them, the revocation of excise duty will reduce revenue receipts significantly and weaken authorities in their drive against tax evaders and illegal tobacco manufacturers.

“Government’s decision to levy advance excise duty on unmanufactured tobacco purchased from GLT units will play an important role in documenting the cigarette industry,” remarked Pakistan Tobacco Company Area Corporate Affairs Manager Madeeh Pasha.

He emphasised that monitoring 10 to 11 GLT units was easier than keeping a close watch on thousands of cigarette retailers across the country.

Earlier, the people involved in illegal cigarette trade used to buy tobacco anonymously from GLT units through middlemen. The practice made tax evasion easier for the middlemen, who were happy to pay a tax of Rs10 per kg as anonymous purchasers and were a source of millions of rupees worth of profit for illegal manufacturers, he said.

With the advance excise duty fixed at Rs390, anonymous purchases would now be impossible as the manufacturers submitting tax returns for the adjustment of advance excise duty would have to disclose their business and income, he added.

“Elements involved in illicit business want to thwart the government’s initiative by using fake farmers.”

According to the Pakistan Tobacco Board, during the current year, 48 cigarette manufacturers registered with the board will buy 53.5 million kg of tobacco from growers, which will ultimately pass through 11 GLT units.

Experts believe this initiative will help in documenting the cigarette industry while reducing the annual loss of Rs80 billion to the economy due to illegal practices. It will restrict the illicit traders from tax evasion.

Tobacco grown in Pakistan is processed at GLT units located in Khyber-Pakhtunkhwa and Azad Jammu and Kashmir. Major companies have their own threshing units.

It was difficult for the Federal Board of Revenue (FBR) to monitor 48 manufacturers and thousands of retailers, which was encouraging tax evaders to continue illegal trade that caused a loss of Rs80 billion to the national exchequer annually.

Published in The Express Tribune, September 14^th, 2022.

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