In a major policy shift, tax authorities are contemplating holding back the process of abolishing federal excise duty on goods and services, started two years ago, and instead want to impose the duty on two dozen items in next year’s budget.
The items include cosmetic products, racing cars, filter rods of cigarettes, lubricant oils, air conditioners, deep freezers and various types of other oils.
Sources in the Federal Board of Revenue revealed that tax officials have proposed that the policy to phase out Federal Excise Act of 2005 over three years may be abandoned from the next fiscal year, 2013-14, following the previous government’s move to abolish duty on 25 revenue-generating items which hit tax collection hard.
If the duty stays, it will generate billions of rupees next year, but the final decision will be taken by the Pakistan Muslim League-Nawaz government that is poised to take the reins of the country after winning general elections. Sources said excise duty on most of the goods had been removed by the last government as an incentive to the private sector to bring down product prices. But the duty on some of goods like motor oil and waste oil was scrapped allegedly in the face of pressure from some vested interests and in return for kickbacks.
The exchequer suffered a revenue loss of Rs 8 billion on just these two items, they said.
Excise duty is universally imposed to curb consumption of luxury items, but this principle is violated by successive governments as the duty is levied on many essential items as well, said Ashfaq Tola, a renowned chartered accountant from Karachi and a tax expert.
