Given that the government is introducing a new law to levy taxes of Rs. 70 billion on various industries, the cost of tier-1 cigarettes (Goldleaf, etc.) is anticipated to rise by Rs. 20 to 30 per pack. Tier-2 cigarettes’ (Capstan, etc.) costs are anticipated to rise by Rs. 10 per pack.
The newly released decree, which said that a total tax of Rs. 38 billion had been levied on cigarettes and tobacco, was signed by the President on Monday. The greater burden of Rs. 36 billion will be borne by the cigarette sector, and the remaining Rs. 2 billion would come from the processing of tobacco.
The tax on the processing of tobacco, which was formerly merely 10 rupees per kilogram, has now been raised to 390 rupees per kilogram by the current administration.
The Federal Excise Duty on locally produced cigarettes, on the other hand, has increased from Rs. 1850 per 1000 sticks to Rs. 2050 per 1000 sticks for tier-2 cigarettes and from Rs. 5900 per 1000 sticks to Rs. 6,500 per 1000 sticks for tier-1 cigarettes.
The government decided to lower the retail tax target from Rs. 42 billion to Rs. 27 billion, leaving a gap of Rs. 15 billion, which has been filled by the tax on cigarettes. The Finance Ministry had suggested taxing the tobacco and cigarette industries for Rs. 18 billion to close this gap, but the Prime Minister ordered doubling the taxes for a total of Rs. 36 billion.
In addition, the government has placed onerous regulatory burdens on the importation of expensive items. According to the regulation, additional tariffs of between 10 and 100 percent have been levied on the import of all varieties of imported cars, mobile phones, and household appliances.
Additionally, the additional regulatory charge has been levied on imported food items such as meat, fish, fruits, and vegetables as well as furniture, clothing, and footwear.
According to experts, the Pakistani government wants the program to be approved at all costs to allow the transfer of a $1.17 billion tranche at the IMF Executive Board meeting scheduled for August 29. During its meeting, the Board will also decide whether to expand the program to $7 billion.