Govt hikes adjustable FED on unmanufactured tobacco at GLT stage

ISLAMABAD: The government has increased the adjustable FED on unmanufactured tobacco from Rs10 per Kg to Rs390 per Kg, applicable at Green Leaf Threshing (GLT) stage in a bid to enhance revenue from tobacco sector.

According to details, the adjustable excise is applicable to and payable by the cigarette manufacturers. The objective of this move is to increase documentation of the tobacco industry and curtail illicit trade.

The recent increase in adjustable excise aims at increasing the cost of evasion being done by illicit cigarette manufacturers.

This excise tax is adjustable at the time of filing of returns by the manufacturer. As for export, rebates may be claimed at the export stage and for manufacturers.

It may be adjusted at the time of filing of the manufacturer’s tax returns.

While briefing journalists, Pakistan Tobacco Company, reiterated that the adjustable excise duty of Rs390 per kg is not applicable to farmers at all but is a liability on the cigarette manufacturers at the GLT stage. However, the manufacturers can adjust this in their monthly tax returns.

The Senate Standing Committee on Finance on Wednesday also discussed the issue of Tobacco farmers of KPK who are forced to leave this business due to heavy taxation.

Senator Faisal Saleem Rehman claimed that around 0.5 million farmers have been affected by these hefty taxes, however, Chairman committee form Sub Committee which will investigate the matter and present its report before senate body.

Meanwhile, PTC representatives said that the false narrative being created regarding this adjustable excise having any impact on farmers is completely baseless and false.

Illicit manufacturers are trying to influence policies in their favor by promoting this false narrative.

Officials further explained that the tobacco farmers have nothing to do with the GLT stage as threshing is part of the cigarette manufacturing process.

It is pertinent to mention here that the PTI government in October 2018 increased adjustable excise duty from Rs10 per Kg to Rs 300 per Kg in the mini-budget however, due to pressure from certain quarters it was reversed before the GLTs became operational.

Experts believe that adjustable advance duty at the GLT stage is a perfect way to control tax evasion as it is the choking point in the process of manufacturing cigarettes.

Currently, there are approximately 13 GLTs in Pakistan and AJK, where there are over 40 cigarette manufacturers. With regards to enforcement, it is administratively more efficient to monitor 13 GLTs rather than deploying enforcement officials at over 40 cigarette manufacturers or hundreds of thousands of retail outlets.

The payable adjustable excise at the GLT stage can also be used as a metric to gauge what revenue was received from the manufacturers at this stage and what percentage was adjusted at the time of filing of tax returns.

Experts requested the government to carry out strict enforcement across the board for implementation of the adjustable excise duty on unmanufactured tobacco and also for implementation of the Track & Trace regime to help in curbing illicit trade and providing a level playing field to legitimate players in the industry. Simultaneously, monitoring of cigarettes being manufactured in AJK and being transported to Pakistan for sales must also be done and the government must set up check posts at all entry/exit points to and from AJK.


Shahzad Paracha
The writer is a member of Pakistan Today's Islamabad bureau. He can be reached at [email protected]


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