Late on Tuesday night, the government initiated the implementation of its mini-budget by announcing a sales tax rate increase from 17% to 18%, as well as a 150% hike in the Federal Excise Duty on cigarettes. This announcement, which came into effect from February 14th, 2023, was accompanied by the release of an SRO.178(I)/2023 by the Federal Board of Revenue (FBR).
With immediate effect from midnight on Tuesday, imports will be subject to an 18% sales tax, as per the notification. The notification further stipulated that the Federal Excise Duty rate for locally produced cigarettes will vary according to different slabs based on on-pack printed retail price.
In the case of locally produced cigarettes with an on-pack printed retail price above Rs. 9000 per 1000 cigarettes, the Federal Excise Duty rate under the first slab will be Rs. 16500 per thousand cigarettes. Meanwhile, for the second slab, which is for locally produced cigarettes whose on-pack printed retail price does not exceed Rs. 9000 per 1000 cigarettes, the Federal Excise Duty rate will be Rs. 5050 per thousand cigarettes.
It is important to note that the FBR has the legal authority to issue notifications to change the duty structure at the import stage, provided they have received prior approval from the cabinet.