The Federal Government has imposed a new tax on cigarettes and tobacco products worth Rs. 36 billion to reduce the fiscal deficit and circular debt. The Finance Minister said in his press conference that the levy is needed to make up for the decrease in retail tax from 42 billion to 27 billion rupees. The Ministry of Finance first asked for Rs. 18 billion in cigarette taxes to close the gap. The Federal Government chose to double the taxes, increasing their value to Rs. 36 billion.
The entire tobacco tax was applied on a stack of 50 packs (1000 cigarettes) In comparison to tier-2 cigarettes (Capstan, etc.), which saw a price increase from Rs. 1,850 to Rs. 2,050, tier-1 cigarettes (GoldLeaf, etc.) saw their tax increase from Rs. 5,900 to Rs. 6,500 on a stack of 50 packs.
The tobacco tax has also increased in a similar manner, going from Rs. 10 per kg to Rs. 380 per kg, a 3,800% increase. Miftah contends that the tobacco tax is a cess, as opposed to the excise tax that applies to cigarettes (tax).
The PTI government increased the tobacco tax from Rs. 10 per kg to Rs. 300 per kg before being forced to change direction in response to pressure from the tobacco industry.
According to Miftah, the tobacco tax will help regulate the tobacco industry and stop illicit cigarette production. Additionally, it will compel tobacco companies to pay sales tax, which they previously avoided, and join the track-and-trace system of the government. Four additional businesses have been added to the system, he said.