Budget FY25: Enhanced FED measures on multiple sectors

June 13, 2023 (MLN): The government has introduced stringent measures for Federal Excise Duty (FED), spanning across multiple sectors, especially Cigarettes & Tobacco to meet its revenue targets for FY25.

Beginning with the cement industry, the current rate of FED is set at Rs2 per kilogram of cement, and it has been decided to increase it by 50% to Rs3 per kilogram for FY24-25.

The decision to hike FED spreads across the Cigarettes & Tobacco sector, as the government has proposed to impose FED worth Rs44,000 per Kg on Acetate tow, which is the main ingredient used in cigarette filter production.

This proposal will not put any additional burden on the 1st sector while the Informal Sector will give this additional FED, as per the government.

In an additional drastic change, Cigarettes & Tobacco will take a further hit as the rate of FED on filter rods will be enhanced from Rs1,500 per kg to Rs80,000 per Kg in FY25.

Moreover, the proposed increase in the price threshold for locally manufactured cigarettes from Rs9,000 to Rs12,500 is likely to lead to higher cigarette prices, as manufacturers adjust to the new threshold.

Throughout the ongoing fiscal year, the Federal Board of Revenue (FBR) has launched a rigorous crackdown against smuggled cigarettes.

To extend this operation, the government has empowered authorities to seal the business premises of retailers selling illicit cigarettes in FY25.

Meanwhile, it is proposed to exempt diplomats and diplomatic missions from FED.

The hectic burden of FED will be witnessed by the sugar industry, as it has been decided to set FED at 15 per kg on the supply of sugar to manufacturers.

Furthermore, FED on commercial properties and the first sale of residential properties will be lodged at 5% in the upcoming fiscal year.

It is worth noting that the government targets to generate Rs948bn in FED revenue in FY25, which is 58% higher compared to the revised estimates of the outgoing fiscal year (FY24).

FED revenue of Rs948bn would cover 7.31% of the total revenue collection by the FBR in the upcoming fiscal year.

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