LAHORE    -    Track and trace system has been launched and implemented to prevent the heavy annual loss to the economy due to tax evasion on illicit trade in major industries. Following the implementation of the track and trace system, cigarettes sold without tax stamps will now be illegal, with involved vendors and manufacturers facing imprisonment and fines.

FBR has launched a track and trace system to monitor the sale of products in five major industries in Pakistan including the sugar, fertilizer, cement, and tobacco industries.

Under this system, with the help of tax stamps affixed on the product packaging, not only the tax authorities but also the manufacturers and consumers themselves will be able to verify the product’s authenticity and the tax payment on it.

From July 1, 2022, affixing tax stamps on every pack of cigarettes sold in the country has been made mandatory. This measure has been introduced to curb illegal activities in the cigarette industry. These stamps will help differentiate between tax-paying and non-tax-paying cigarettes.

Tax stamps will be affixed on the back edge of the packaging near the packet opening mark to prevent potential fraud by eliminating the possibility of the same product being sold twice. Once the packaging is opened and used, the tax stamp will also be torn and a product cannot be resold in the market. According to cigarette industry sources, Pakistan loses 80 billion annually due to tax evasion in the tobacco sector. The introduction of track and trace system will help in tax collection and reduce the rate of illegal sales of cigarettes in Pakistan.

A tax stamp will be placed on cigarette packs with the aim of bringing the tobacco industry into the tax net and curbing the sale of illegal cigarettes.

The relevant application can be downloaded by scanning the QR code printed on the tax stamps affixed to each pack of cigarettes.

On scanning the tax stamp through this application, the database of the track and trace system will instantly confirm the payment of tax on the packet. According to experts, now consumers will also be able to verify through the track and trace system that the product they are using is genuine and the tax has been paid on it. If there is no tax stamp on the cigarette packet, it can also be identified through the FBR website by scanning of violated product with pictures and other details.

On the one hand, track and trace system will help in improving the economy by preventing the huge loss of tax evasion to the national exchequer, while investment in the cigarette industry and legal industry will also be promoted. After the implementation of the track and trace system, cigarettes sold without tax stamps have been declared illegal.  Shopkeepers and manufacturers involved in illegal sales will face heavy fines of up to three years in prison, while stocks found without tax stamps will also be confiscated and destroyed.

According to cigarette industry sources, only three major manufacturers have adopted the track and trace system so far. More than 50 cigarette companies are doing business in the country, many of which are in litigation due to their concerns over the track and trace system.

According to experts, it will be difficult to achieve the desired results without bringing all the players in the cigarette industry under the supervision of a track and trace system.