FBR makes sticking tax stamps, UIM on cigarette packs mandatory

• FBR directs tobacco sector to place a Track and Trace System to identify non-duty paid products.
• Mandates no tobacco product should exit from factory premises without tax stamps.
• Four tobacco manufacturers acquire stay from PHC against FBR's directives.

ISLAMABAD: The Federal Board of Revenue has made affixing a tax stamp or Unique Identification Marking (UIM) mandatory on every tobacco product, with effect from April 30, 2022, The News reported.

An official notification issued by the FBR in this regard said that a Track and Trace system should be placed to make sure that no tobacco product should be allowed to exit from the factory premises without affixation of the tax stamps so that the non-duty paid products can be identified.

After placing the Track and Trace System in all sugar mills across the country, FBR is up to placing it in the tobacco sector as well.

However, a crackdown on the non-duty/taxes paid cigarettes would still be required by the FBR workforce or else all the technological solutions will be rendered ineffective.

Meanwhile, four tobacco manufacturers have already reached out to the Peshawar High Court and obtained a stay against FBR’s notification for putting an additional burden on the shoulders of manufacturers in the shape of cost for placing the Track and Trace system.

However, the FBR issued formal Sales Tax General Order (STGO) Wednesday, saying the Board would implement a 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 the 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 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.