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.