In accordance with Article 89(1) of the Constitution, the president approved the Ordinance on the prime minister’s recommendation. The Sales Tax Act of 1990, the Income Tax Ordinance of 2001, the Federal Excise Act of 2005, and the Finance Act of 2022 have all been amended as a result of the Ordinance.
According to Minister of Finance and Revenue Miftah Ismail, during a news conference, the Federal Government has imposed a new tax on cigarettes and tobacco worth Rs. 36 billion. The levy, according to the Minister, is intended to fill the hole left by the drop in retail tax from 42 billion to 27 billion rupees.
To fill the gap, the Ministry of Finance initially requested a tax on cigarettes of Rs. 18 billion. However, the Federal Government opted to double the taxes, making them worth Rs. 36 billion.
Tier-2 cigarettes (Capstan, etc.) stack of 50 packs (1000 cigarettes) now have a total tax of Rs. 2,050 instead of Rs. 1,850, while tier-1 cigarettes (GoldLeaf, etc.) stack of 50 packs now have a total tax of Rs. 6,500 instead of Rs. 5,900.
Read More: Quit smoking or pay taxes!
Similar to this, the tax on tobacco has raised by 3,800% from Rs. 10 per kg to Rs. 380 per kg. According to Miftah, the tax on cigarettes falls under excise tax, whereas the tax on tobacco is a cess (tax).
It is important to note that the PTI government raised the tobacco tax from Rs. 10 per kg to Rs. 300 per kg before having to reverse course in response to pressure from the tobacco sector.
Miftah stated that the tobacco tax will aid in regulating the tobacco sector and halt the creation of cigarettes that is done illegally. Additionally, it will force tobacco businesses to pay sales tax, which they had previously avoided, and become a part of the government’s track-and-trace system. He noted that four new companies have so far been registered in the system.