The federal government in a surprise move raises taxes on cigarettes with immediate effect to collect Rs115 billion out of the planned Rs170 billion mini-budget.
According to the notification issued by FBR for the Statutory Regulatory Order (SRO) for hiking the General Sales Tax GST rate from standard 17 to 18% and increasing the Federal Excise Duty (FED) on cigarettes in order to fetch an additional Rs115 billion out of Rs170 billion agreed to by the government in line with the IMF conditions. The Federal Excise Duty (FED) on cigarettes has also been raised.
Also Read: IMF issued Offical Statement over deal with Pakistan regarding Loan Program
The government has increased FED on expensive brands from Rs6.5 per cigarette to Rs16.5 – an increase of 153%. For less expensive brands, the per stick increase is from Rs2.55 to Rs5.05 – an increase of 98%.
The Federal Board of Revenue (FBR) issued the notification after the cabinet approved the finance bill which is being presented in parliament.
Arif Alvi Objection
Earlier Federal Finance Minister Ishaq Dar called on President Dr. Arif Alvi at Aiwan-e-Sadr to discuss the country’s economic policies.
During the meeting, the finance minister briefed the president on the overall economic and financial situation of the country. The finance minister also briefed the president on International Monetary Fund (IMF) bailout loan conditions.
The meeting also discussed the imposition of Rs170 billion in additional taxes via a mini-budget. Some sources said that the federal cabinet is likely to approve the imposition of Rs170 billion through the Mini Budget today.
The coalition government has started implementing ‘tough conditions’ tabled by International Monetary Fund (IMF) to revive the $7 billion Extended Fund Facility (EFF) stalled for months.
During the talks, President Arif Alvi raised objections to the government’s ‘mini-budget’ for imposing heavy taxes.
According to the details federal government decided to impose an ordinance for implementing the budgetary recommendations. The federal government seeking approval from the president to sign an ordinance for the imposition of a mini-budget ordinance.
Following President Dr. Arif Alvi’s objections, the government and president decided to approve the mini-budget-related legislation via a bill that should be presented before the parliament.
The federal government wants to immediately impose the legislation via an ordinance instead of passing a bill from the parliament to avoid spending more time.
Sources added that the government would contact President Alvi again to request him to immediately promulgate the ordinance after its approval from the federal cabinet
Finance Bill in NA
Federal Minister for Finance Minister Ishaq Dar Presented the Finance (Supplementary) Bill 2023 or the “mini-budget” in the National Assembly as the government needs to fulfill the conditions of the International Monetary Fund (IMF) to secure the loan program needed to avoid a default.
The finance minister also announces to increase General Sales Tax GST rate from 17 to 18% and increasing the Federal Excise Duty (FED) on cigarettes and Tobacco in order to fetch an additional Rs115 billion out of Rs170 billion agreed to by Pakistan in line with the IMF conditions.
Mini-budget proposals
- Govt has increased GST on luxury items from 17% to 25%
- Increase in federal excise duty on cigarettes and fizzy drinks.
- Increase in federal excise duty on cement
- GST has been increased from 17pc to 18pc
- Benazir Income Support Programme (BISP) handouts increased to Rs400bn from Rs360bn
- FDE on business and first-class air tickets to now be Rs20,000 or 50% — whichever is higher
- GST is to not be imposed on essential goods.
