Tax imposed to fulfil the gap created from reduction in retail tax from Rs. 42 billion to Rs. 27 billion. The Ministry of Finance had initially suggested a tax of Rs. 18 billion on tobacco. However, the Federal Government decided to double the taxes toRs. 36 billion.
The total tax imposed on a stack of 50 cigarettes has been increased from Rs. 1,850 to Rs. 2,050. Tax on tobacco has also been increased by 3,800 percent. The tax on tobacco is a cess (tax) whereas that imposed on cigarettes comes under excise tax.
The tax on tobacco will help in regularizing the tobacco industry putting an end to the illicit production of cigarettes. Tobacco companies will also have to pay sales tax which they had been evading previously. Till now four new companies have been registered in the track and trace system.