As FBR implements a tracking system, tobacco companies resort to court

As the Federal Board of Revenue (FBR) prepares to implement the track-and-trace (T&T) system in all four selected sectors, tobacco businesses have filed a new lawsuit against the tax collection agency.

The FBR has prohibited all tobacco firms from selling cigarettes without tax stamps, and certain corporations that had previously filed a lawsuit against the FBR have filed a writ petition with the Peshawar High Court (PHC) requesting a relaxation of the T&T system.

Because the T&T system was adopted on July 1, the tobacco manufacturers have contended that the sale of their old stock manufactured before June 30 should be authorized.

On the other hand, the FBR asserts that old inventory must be liquidated by June 30 and that the present laws apply to sales made during the new fiscal year. The next hearing is scheduled for July 13.

The installation of the track-and-trace system was already delayed when 12 cigarette makers filed a lawsuit in the PHC, requesting that the FBR cover the installation costs.

However, shortly after the PHC denied the appeal in the latter week of June, FBR teams began preventing the transportation of cigarette stocks from industrial facilities that lacked the Unique Identification Marking (UIM) of the T&T system on July 4.

Of the 40 registered cigarette manufacturers, 21 are operating now; however, only three have implemented the T&T system, while 18 have yet to sign the corresponding agreement with the FBR, resulting in the cessation of their sales.

Two international corporations, notably the Pakistan Tobacco Company and Philip Morris, are among the three cigarette makers that have installed the monitoring system, according to Tariq Hussain Shaikh, project director of the T&T system.

Khyber Tobacco Company (KTC) is the only local company to have implemented the system. It expects its contribution to taxes to be approximately Rs2 billion in the 2021-22 fiscal year. Shahid Sattar, KTC’s chief technology officer, stated that the move would assist the company in expanding its footprint on the Pakistani market and bringing its product quality up to international standards. In 2022-23, the government has set the export target for KTC at $100 million.

Mr. Shaikh of the FBR stated that the T&T system would aid in overcoming massive losses in the tobacco, sugar, cement, and fertilizer industries. For example, the sugar industry implemented the system on November 23, 2021, for the crushing season 2021-22, resulting in a 34 percent increase in sales tax compared to the previous year.

The system has been implemented in the fertilizer and cigarette sectors since the beginning of the current fiscal year. At the same time, its implementation in the cement industry is expected to begin in October.