Excise duty on cigarettes likely to increase in budget

Lahore - The Federal Board of Revenue has proposed to increase excise duty on cigarettes in the upcoming budget for 2013-14 to cater high revenue targets set by the government for FY 14-15.  Market sources in tobacco industry said that it witnessed a 15% increase in excise duty during the last budget while they are anticipating an even higher increase this year.  Figures show that the tobacco industry follows an uneven sales pattern where the first half of the fiscal year witnesses very low sales which pick up during the third quarter and peaks towards the pre-budget months.

The core reason for this is pre-budget hoarding where the trade channel invests heavily in cigarettes at pre-budget prices with a view to gain from de-loading at higher prices.
The cigarette industry has shown concerns over the expected sharp increase in excise rates, particularly with regards to the low value brands since the increasing price gap between legal and illicit products is getting larger and such steep increases will further fuel illicit trade which today sits at 25.4% of the total market.
Since the excise increase this year is expected to be much higher than the previous year, the cigarette industry is anticipating excessive trade loading.

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