ISLAMABAD: Collecting adjustable tax at the green leaf threshing (GLT) stage will benefit tobacco growers and the cigarette industry and help contain tax evasion in the sector, a tobacco sector stakeholder said on Thursday.

The government has increased the adjustable federal excise duty (FED) on unmanufactured tobacco from Rs10 per kg to Rs390 per kg, applicable at the GLT stage, a move the industry believes has almost contained unregistered and illegal cigarette manufacturing in the country.

“The FED at GLT stage is neither paid by farmers nor middlemen, who purchase tobacco leaves from the farmers,” said Jamal Toru, senior manager at Pakistan Tobacco Company (PTC).

He was briefing the media about tobacco processing and its taxation mechanism at the GLT unit of the company in Akora Khattak town of Khyber Pakhtunkhwa.

The FED is levied by the Federal Board of Revenue (FBR) teams on processed tobacco as it leaves the GLT unit, but it is adjustable at the time of filing tax returns by the manufacturer, whereas a rebate can be claimed at the export stage for the export of processed tobacco. He emphasised that the move would help reduce illegal cigarette manufacturing and sales by unregistered cigarette manufacturers.

“It is easy to implement the FED and documentation of output at 13 GLT units in the country, compared to enforcing taxation laws at a large number of unregistered cigarette manufacturers and retailers,” Mr Toru said.

Like sugar, the cigarette industry is also based on seasonal crops. The growers sell their produce between July and September to the GLT units, which continue to process tobacco leaves for five months.

Published in Dawn, September 23rd, 2022