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Tag: FED

  • Pakistan Sees Cigarette Revenue Fall Despite Huge Tax Hike

    Pakistan Sees Cigarette Revenue Fall Despite Huge Tax Hike

    Despite a 200% increase in duty rates, Pakistan’s Federal Board of Revenue (FBR) reported a 4.1% drop in Federal Excise Duty (FED) collection from the cigarette sector, falling to Rs225.5 billion ($789.3 million) in FY2024-25 from Rs235 billion ($822.5 million) the previous year. Officials attributed the decline to a growing illicit cigarette market, which continues to undermine tax collection.

    The sector’s share in total FED revenue plunged from 40.7% in FY24 to 29.4% in FY25, highlighting enforcement challenges and the government’s struggle to curb illegal production and sales. Higher taxes have reportedly pushed consumers toward untaxed brands, further reducing formal industry revenue.

    FBR officials warned that without stronger enforcement against illicit cigarette trade, the formal tobacco industry will continue to shrink, depriving the government of vital revenue for development and public health programs.

  • Pakistani Court Strikes Down Local Tobacco Excise Duty

    Pakistani Court Strikes Down Local Tobacco Excise Duty

    Pakistan’s Peshawar High Court declared the Khyber Pakhtunkhwa government’s provincial excise duty on unmanufactured tobacco unconstitutional. The bench ruled in favor of multiple petitions filed by leading tobacco companies, including Pakistan Tobacco Company, stating that the relevant provisions of the KP Finance Act, 2024 conflicted with the Constitution.

    The petitioners challenged the Rs50 ($0.18) per kilogram levy on unmanufactured tobacco, arguing that excise duties fall exclusively under federal jurisdiction under the Federal Legislative List, and that the provincial assembly had no authority to impose a parallel duty. Lawyers for the petitioners emphasized that federal excise duty (FED) on tobacco is already administered by the Federal Board of Revenue under the Federal Excise Act, 2005, and the KP law encroached on parliamentary powers.

    The court sided with the petitioners, agreeing that following the Eighteenth Amendment, the omission of the concurrent legislative list gave parliament exclusive power over matters such as excise duties, making the provincial tobacco levy ultra vires.

  • Pakistan Increases Tobacco Tax 240%

    Pakistan Increases Tobacco Tax 240%

    With cigarette manufacturers in Pakistan already pointing to an excessive Federal Excise Duty (FED) as a reason for a significant decrease in sales and a rising black market, the federal government announced it is imposing a 6% withholding tax on cigarette distributors in the 2025-26 budget, senior sources told ProPakistani. This will be an increase from the previous 2.5% rate.

    The provision for withholding tax rates under Section 153 of the Income Tax Ordinance will be changed to charge the new tax on the gross amount of payment received by distributors when they hand over cigarette sticks to retailers.

    It was previously reported that Pakistan’s government was facing pressure from the World Health Organization to increase its FED further.