FBR makes it mandatory to affix tax stamp, UIM on cigarette packets

Mehtab Haider
Thursday, Jan 20, 2022

ISLAMABAD: The Federal Board of Revenue has made it mandatory that no tobacco product will be allowed to exit from the factory premises without affixation of tax stamp/Unique Identification Marking (UIM) with effect from April 30, 2022.

The official notification issued by the FBR Wednesday made it mandatory to place Track and Trace System for affixation of stamp/UIM on every packet of cigarettes produced at a factory as it would help identify through Track and Trace System for non-duty paid products. However, all technologically based solutions would become futile if the FBR’s workforce would not launch a crackdown on non-duty/taxes paid cigarettes. The FBR has placed Track and Trace System for all sugar mills all over the country. Now the FBR wants to implement this system for tobacco sector. However, four tobacco manufacturers approached the Peshawar High Court and obtained stay order against FBR’s notification for placing additional expenditure burden on the shoulders of manufacturers. However, the FBR issued formal Sales Tax General Order (STGO) Wednesday and said the Board would implement Track and Trace System on tobacco products. The provision of Section 40C (2) of the Sales Tax Act, 1990 read with Rule 150ZF of the Sales Tax Rules 2006 mandate the Federal Board of Revenue to notify the date for the implementation of electronic monitoring production and sales of goods in the manner prescribed in the law on all manufacturing sites of notified sectors.

In exercise of the power conferred under section 40C (2) of the Sales Tax Act, 1990 and Rules 150ZF of Sales Tax Rules 2006, it is hereby notified that no tobacco products shall be allowed to be removed from a production site, factory premises or manufacturing plant without affixation of tax stamp/UIM with effect from April 30, 2022 which are to be obtained/procured from FBR’s licensee M/s AJCL/MITAS/Authentix Consortium. The FBR’s STGO further stated that tobacco products manufactured in Azad Jammu and Kashmir (AJK) and erstwhile Fata/PATA shall not be allowed to be entered into Pakistan’s tariff areas without affixation of tax stamps. Tax experts were of the view that the placement of Track and Trace System could help the FBR for identifying non-duty paid cigarettes but without effective enforcement and launching countrywide crackdown it would become futile to place technological based solutions. The Track and Trace will help the FBR to gauge the real production of the formal sector. However, the tax machinery will have to take strict action against illicit cigarettes because its share has been increasing over the last few years. The formal tobacco sector has estimated that the illicit cigarettes were causing Rs77 billion losses to the national exchequer but it was an interesting fact that the FBR had never bothered to come up with its own research to assess how much the FBR was facing revenue losses in the wake of an increasing share of illicit cigarettes.