It is reliably learnt that on the indirect taxes side, the major revenue spinner of the FED is cigarettes where the third tier of the FED structure on this item has resulted in increase in FED during the outgoing fiscal year by more than 20 percent. The FBR will have to rely on major revenue spinner, ie, cigarettes to meet the assigned target of indirect taxes in 2018-19.
Meanwhile, the FBR would fully equip tobacco squads of Inland Revenue Enforcement Network (IREN) with necessary equipment and infrastructure in budget (2018-19) to intensify its operations against locally manufactured tax-evaded and counterfeit cigarettes.
According to sources, the FBR has realized the importance of IREN with the retention of third slab of FED on cigarettes in coming budget. Government revenue has simultaneously benefited from two major actions of the government ie third tier of FED on cigarettes and actions of IREN against the non-duty paid cigarettes. This has realized the fact that both these policy measures must continue in 2018-19 to ensure enforcement actions as well as availability of duty paid cigarettes in the market. A third tier allowed for an increase in FED by 20 percent whereby revenue from government will go up from rupees 74 billion to more than rupees 94 billion. More than 1.5 billion cigarette sticks and raw material was seized in 2017 alone.
The tobacco squads in the Regional Tax Offices need to be equipped with vehicles and other necessary equipment to continue to enforce actions in the next fiscal year.
The IR Enforcement network needs full backing of the government to further increase its actions in the filed formations along with continuation of policy on cigarettes in next budget.
Moreover, the government is expected to in increase funding to the IR Enforcement network to expand its operational jurisdiction to other territories, sources said.
The revised FED structure on cigarettes played a key role in increasing excise duty collection from major revenue spinner, ie, cigarettes during 2017-18. As the federal budget for 2018-19 is on the cards, major focus of revenue generation on indirect taxes would be excisable commodities like cigarettes, services (international air travel), beverages, cement, natural gas and edible oils etc.
The FBR has appreciated that there is a decrease in illicit trade of cigarettes on account of enforcement action of Inland Revenue (IR) Enforcement Network on illicit tobacco/cigarette trade and third tier/slab (FED) on cigarettes, which made duty structure under three tiers. But authorities realized that continuous steps in coming year are essential to fight against tax evasion in tobacco industry.